Saturday 28 February 2015

By Marc Shoffman for The MailOnline
culled from:
I want to make sure my investments are protected and I know that £50,000 of money invested with each investing platform or fund house is covered by the Financial Services Compensation Scheme. But how can I protect amounts above this limit?
Protected: The Financial Services Compensation Scheme protects up to £50,000 of investments and £85,000 of cash deposits
Protected: The Financial Services Compensation Scheme protects up to £50,000 of investments and £85,000 of cash deposits

Mark Polson, of platform research business the lang cat, replies: Investments are 'insured’ or protected by the Financial Services Compensation Scheme.
The exact arrangements are complex, but broadly speaking the first £85,000 of any cash deposits in a savings account with a bank or building society are covered if it goes bust.
You only receive this £85,000 coverage once under each bank or building society's 'compensation licence', it is doubled to £170,000 for joint accounts. You can ask for information on how you are covered by the FSCS from your bank and get a full explanation of savings compensation here.
Under a separate part of the scheme you also get compensation cover for the first £50,000 of any investments. Remember this is not cover against you losing money if investments go down, ie your fund dips in value, it covers you against losses if the investment provider or platform goes bust.
This covers the companies who are holding investments on your behalf; it doesn’t mean that if a firm you buy shares in goes bust you get your money back.
I’ve looked but can find no-one willing to offer this kind of insurance. In its absence and if you are concerned then you may wish to consider spreading investments around and holding no more than £50,000 with any one fund house or custodian.
Most fund houses and platforms will appoint another company known as a custodian to look after your money.
And that is important – a bit like different banking brands, sometimes behind the scenes different investment brands use the same custodian to hold your investments. 
Broadly speaking, if your investment platform or provider gets into difficulties, you may face delays and frustration, but your money should be safe as it is held separate from the assets of the company itself.
A custodian provides this service; these are normally very large, highly regulated and financially stable organisations such as Bank of New York Mellon, Citibank and Deutsche Bank.
For your money to disappear, it is the custodian who would need to fail rather than the business through which you transact investments.
So if the fund house, platform or custodian goes bust, you are covered by FSCS up to £50,000.
So in that situation, let’s say you are with Platform Z, which uses custodian X, and you’ve asked them to buy Fund Y from Fund Manager W.
If Fund Manager W goes bust you have FSCS cover to £50,000. Same for the custodian and for the platform. What you do not have is protection against Fund Y falling in value.


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