FSCS protection and ringfencing.

msaving_advice18 · 22 October at 12:42PM

Hello, I'm new to money saving and looking for a good ISA. I have seen the Plum Cash ISA with 4.45% AER. This ISA has 3.04% base rate protected by the FSCS safety scheme and the 1.33% not protected by FSCS but is 'ringfenced'. Can someone explain the safety behind getting this ISA? Does the FSCS protection mean in the case of Plum or one of the Banks holding the savings going bust, I will receive the money which should've accumulated up to the 3.04% aswell as my original savings? And what does 'ringfencing' mean?

MyRealNameToo · 22 October at 1:13PM

FSCS is £85k per person per bank so it matters where they are putting your money and where else you hold money.

Ringfencing covers a multitude of mechanisms but in principle it means your funds and their funds are clearly seperated and in principle if they were to get into financial difficulty that only their own funds can be used to repay creditors etc.

Albermarle · 23 October at 10:03AM

Some of these newer providers are operating slightly unusual business models.
If you are not comfortable with that then best to stick to a more conventional provider.
By that I do not mean just big banks, but any bank/savings provider offering full FSCS cover.
Also searching the forum for Plum, you will see their name crops up quite often.

Alexland · 23 October at 10:29AM

Albermarle said:

Some of these newer providers are operating slightly unusual business models.

Yes IMHO some providers are not being completely clear about the risks people are taking and limitations of FSCS cover. eg. "Don't worry it's ringfenced in a FSCS protected bank" - but what if all the assets are stolen due to a security lapse in the provider not the bank, and the provider's business insurance doesn't cover it due to negligence, and it affects enough customers the provider goes insolvent, oh....