UKC

I see the relevance of distributing cash investments around different institutes when individual values exceed the FSCS £85k limit but am still not sure about investment funds.

Do you need to worry about having ISAs or pensions in Fidelity or Vanguard valued at much more than £85k, if the investments are in World Tracker funds (ie. distributed over 100s of shares).

After many years, surely people have >£200k ISAs or Pensions in Vanguard or Fidelity, Interactive Investor etc.

I don't really understand how FSCS compensation works in those investment-fund cases.  But I think it isn't so relevant is it? 

https://www.fscs.org.uk/what-we-cover/pensions/

I don't think your investments are protected at all in the same way - if the value drops, tough.

There is protection against collapse of the  investment manager and (in theory) you should get your investments back (at whatever value they then have) if the investment manager collapses.  A key difference is a bank will do bank-stuff with any money you have with them, which will carry risk.  A fund manager should only invest in what you tell them to and your money should be separate from the investment managers own money.

There may be protection if you have cash with an investment manager waiting to be invested.  I think most managers have cash like this invested in several different banks, to maximize protection to clients

Yes, not worried about investments crashing.  Just vanguard (The Fund Manager) itself.

From everything I've ever read online, it seems the £85k compensation is irrelevant to Investment Fund Managers, other than say if they actually have some uninvested cash of yours, as you say.  Or they don't invest where they say they have.

Given Vanguard or Fidelity are operate basically SIPPS, that does suggest that in the case of pensions (not ISAs) once you have >£85k in say Vanguard, you should put additional Pension Funds into say Fidelity.  Then once that reaches £85k, switch to say InteractiveInvestor or something else.

But I don't think that is correct, or what people generally do.

If Vanguard go bust you still own the shares so there would be no need for FSCS protectio9n to kick in. 

FSCS will still protect any Cash in Vanguard ISA's.

Where you are at risk is fraud with investment funds over £85k.

Thanks.  That is what I was thinking, but haven't seen that written down so succinctly.

I think you are right but the link above isn't very clear about that.  It implies (I think wrongly) the investments themselves are protected to £85k, or at least could easily be read that way.

It’s not all entirely clear to me either. For example, what happens if you have £85k invested in a Vanguard Lifestrategy fund directly through Vanguard as well as £85k invested in a Vanguard Lifestrategy fund through AJ Bell? If Vanguard go bust where do you stand? 

AIUI, if you have an acount (e.g. an investment ISA) ) with a provider (e.g. Barclays Stockbrokers or AJ Bell), you can hold a range of investments (e.g. Vanguard fund or Blackrock fund) in the ISA.  The FSCS protection & limits would seem to relate to the total value of the ISA (not the individual holdings in the ISA).

Also, if you have shares/funds in an ISA, those shares/funds will (have to) be held in the broker's nominee.  The level of protection provided by the broker's nominee is a murky world.  The broker will proudly tell you your investments are "ring-fenced" if the broker goes bust, but there have been a few cases recently (e.g. Beaufort and SVS) where brokers have gone bust and clients have struggled to extract their holdings, and some have even nearly taken a haircut due to liquidators' fees being taken off the top (unless the FSCS stepped in and covered some of those losses).  All my not be as it seems

I am not a lawyer nor an IFA, and you shouldn't rely on financial advice on an internet forum DYOR

You would still own the underlying investments.

Yes you’re right. The investment firm is required by the FCA to keep clients’ money separate from “their” money. Not sure how smoothly all this would work out in the case of a real life failure but then the obvious alternative is to keep the cash under the bed or spend it.

I'm sure there would be costs involved that would eat into your investment but I guess the FCSC could cover this up to £85k.

I think it's also increasing to £110k soon. Or at least it's being considered.

very often, investments held with providers (e.g. AJ Bell) are held in the brokers's nominee (which is supposedly "ring-fenced" but see above).  However it is *beneficial" ownership.  The name on the shareholder register is that of the broker's nominee company, but you as the customer are the *beneficial* owner.