Limit of FSCS protection, S&S Isa, fund values beyond £85000

Jacksoag

After decades of investing I'm fortunate enough to have an ISA portfolio (currently with ii) with a number of fund values beyond £85k.

I'm uncertain as to the risk that there is to that part of the funds above £85k in each case - they are UK regulated funds with the majority as MMFs.

Does the FSCS scheme only cover up to the £85k and the rest is at risk if the fund itself is in default?

Does being held in nominee accounts then provide the ultimate 'insurance' for the rest? Or not….

If anybody has a link that fully clarifies this aspect then I'd be grateful for that and any related comments.

I feel I need to decide whether to cut the investments into <£85k chunks or rely on some aspect of financial protection that I'm as yet unaware of.

Thanks

eskbanker

Firstly, are they OEICs (which have FSCS protection) or ETFs (which don't), or something else altogether?

masonic

The main risk (assuming you chose investments run by major fund houses) is of the investment platform failing (which is also a pretty low risk with ii (owned by Aberdeen)).

You may find the following recent post helpful (for UK domiciled OEICs you do have FSCS protection, unlike ETFs, but the rest is the same):

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

dunstonh

With MMFs, assuming you have physical replication and are OEIC/UTs, then you get no FSCS protection on the underlying deposits that are held by the fund.

Jacksoag

https://forums.moneysavingexpert.com/discussion/comment/81973652#Comment_81973652

The majority are a mix of OIECs and Unit Trusts in the MMF universe.

One fund is an ETF

iShares £ Ultrashort Bond UCITS ETF Acc GBP

and presumably not FSCS covered. Interested in a link that would confirm ETFs not covered.

Thanks

masonic

https://forums.moneysavingexpert.com/discussion/comment/81973698#Comment_81973698

See https://monevator.com/maximising-fscs-protection-for-your-investment-portfolio/

Linton

what risk do you want to cover?

When you put money in a bank account you exchange it for a promise from the bank to pay you back. The money becomes the property of the bank. You take the risk that the bank may be unable to meet its promise. This is covered by the FSCS.

When you buy a mainstream investment the situation is very different. The cash and the underlying assets it is used to buy continue to be your property, ring fenced from the intermediaries’ own finances. The intermediaries only have the authority to manage your investments within the terms of their remit.

In the rare event of a business failure the FSCS money may be used to pay for lawyers and accountants to sort out any mess but since the costs would be spread over all the investors ithe cover should be more than sufficient.

It is more likely that some other intermediary would take over the business. The customer base is a valuable asset.

So people with serious amounts of money are generally perfectly happy to hold well above any FSCS limit in individual platforms and funds. To cover delays in resolving business failures and IT problems you could use two platforms if you are likely to want to withdraw money at very short notice.

Investment risks such as poor judgement by a fund manager within their remit or the failures of individual investments like shares, bonds, or ETFs are not covered by FSCS. Those risks are the flip side of seeking higher returns than available from savings accounts.

dunstonh

and presumably not FSCS covered. Interested in a link that would confirm ETFs not covered.

A quick google search will confirm that for you.

A general rule of thumb is that traded assets do not get FSCS protection.

FSCS also only applies to investments domiciled in the UK.