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I have a stocks and shares Isa which contains £250,000 in cash and has a further £70,000 invested in the stock market. I am concerned that my cash may not be protected in the event of my fund shop going bust. How can I protect more than the £85,000 that is protected by the Financial Services Compensation Scheme?
TT, via email
The coronavirus outbreak has prompted many people to take a closer look at their finances. There is no suggestion that any banks or fund shops will go bust because of the virus, however, it is best practice to ensure that as much of your cash is protected as possible.
The Financial Services Compensation Scheme (FSCS) is the industry lifeboat fund which will repay savers in the event of a financial provider collapsing. Up to £85,000 of a savers’ cash is protected per financial institution, whether that is a bank or investment platform.
There is no way to increase that. However, given you have the majority of your wealth in cash, you could transfer these funds to cash Isas with banks.
You are able to do a partial transfer from your current stocks and shares Isa, so you could split your cash across four new cash Isas with four different banks to ensure that all of it is protected, should the worst happen. This can always be transferred back into your stocks and shares Isa at a later date.
Remember that any cash held with a fund shop is also protected up to the limit of £85,000, although customers should be aware that the fund shop may use a bank to hold this money. If this bank is the same that you use for your personal banking, you will only be protected up to £85,000. Most fund shops and brokers list who they bank with on their website.
Money Newsletter REFERRAL (Article)
The £70,000 you have in the stock market is not protected as investment losses are not covered by the FSCS. However, should the fund shop cease trading, you would still own the underlying shares.
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