FSCS protection limit

Darnhall123

Apologies if this is a stupid question but it’s something I thought about today and not sure about the answer!

Lets say I had amassed £300k in a stocks & shares ISA over a broad spread of investments with (for example) AJ Bell and AJ Bell go out of business. Am I still only covered up to £120k?

I understand that the FSCS protection limit is £120k per financial institution but does this just apply to ‘cash’ savings accounts or is a S&S account classed differently seeing as the money held in the account is spread over various assets and sectors.

Hopefully my question makes sense.

eskbanker

FSCS protects savings and investments separately and in different ways.

The deposit protection is indeed £120K, which effectively means that it's imprudent to have more than that amount saved in any institution.

Investment cover is still £85K, but in the event of a major broker failing, the investments would simply be transferred to another broker, without loss to the investor, so there's no need to consider limiting investment to the FSCS level, in that the main benefit of the protection here is to cover the likes of post-liquidation administration costs, rather than anything close to the value of the invested assets.

Darnhall123

https://forums.moneysavingexpert.com/discussion/comment/81971001#Comment_81971001

Thank you 🫡

dunstonh

Whilst investment FSCS protection is not as valuable as deposits, it is worth considering if you are with a small player or niche platform and especially one that has a high level of illiquid assets.

Whilst a failing platform with little or no illiquid assets would long be bought before you even got wind of an issue, a platform with illiquid assets would not be that marketable to others.

And don't forget that if you are using ETFs (as seems increasingly popular for many using this forum, you don't get any FSCS protection on those. Not a problem if you are using physical replicated ETFs. However, if you're using ETFs with synthetic replication, then you need to take more care.

Bottom line is if you stick to the mainstream in both platforms and investments, then FSCS protection is largely irrelevant.

Darnhall123

https://forums.moneysavingexpert.com/discussion/comment/81971050#Comment_81971050

I’m even more confused now 🫣😀 So if I had (for example) £150k invested in ETFs, are you saying I’ve got no protection at all!?

masonic

https://forums.moneysavingexpert.com/discussion/comment/81971057#Comment_81971057

If you have £150k invested in Vanguard ETFs and Vanguard goes bust, then you have no protection at all, but you still have beneficial ownership of the shares in the companies invested in by the ETF - the ETF will still exist.

If AJ Bell goes bust, then you have up to £85k cover for any of your ETF holdings that were missing or needed to be sold to meet the costs of AJ Bell's administration. But most likely there would be a buyer that would meet the admin costs, and a well managed platform would have few if any missing assets.

Darnhall123

https://forums.moneysavingexpert.com/discussion/comment/81971146#Comment_81971146

👍👍 Thank you