FSCS for Dummies

[Aljie]

At 59, making the long, hard decision to break into my SIPP has concentrated my thoughts in all sorts of ways I hadn't anticipated, and I've realised I know much less about my investments than I thought.

Discovering the existence of the so-called Uncrystallised Funds Pension Lump Sum has frankly been a game-changer, and I've just completed my first withdrawal. Having only a small amount of part-time earnings - £4k or so - my intention until state pension age is to make annual withdrawals to take me up to the personal allowance, with 25% tax-free cash on top. Part will help towards living expenses (I'm used to living pretty frugally), with the rest split between £2,800 contributions back into my SIPP and top-ups to my stocks and shares Isa. Once the state pension kicks in - 67 in my case - I hope income from my Isa investments will provide a decent (by my standards) tax-free boost to the state pension. My SIPP will be more or less depleted by then, but I'm relaxed about that, and it helps that my other half is receiving a good final-salary pension.

Anyway, that's the theory, and I'm fairly happy with what I've decided. But the process of doing this has made me aware that my Isa is creeping some way over £100k now. It's all with iWeb, and I'm very happy with how it's been working for me, but this has made me wonder if I should be finding a new platform for future investments. What I can't find is any guidance on FSCS limits on stocks and shares Isas that I can actually understand. So can anyone here help me out with a simple explanation?

My portfolio is split between a number of ITs. Surely, even if my platform went bust, my individual holdings would be safe? Or am I missing something? I really do need a simple guide, and my grateful thanks go to anyone who can help.

[GeoffF100]

This topic comes up regularly. Here is a recent thread:

viewtopic.php?f=88&t=36869

[Aljie]

A really helpful thread. Looks like bigger problem - in my case, anyway - would be in having my account in suspended animation for a while. But I can consider this and go forward in more confidence. So thank you - this was just the response I needed.

Aljie

[Fluke]

When I opened a SIPP a few years ago I had the choice of sticking with my existing broker (HL) with whom I'd had an ISA account for many years and was very happy with, or go with a different broker, I opted for the different broker (AJ Bell). The security of not having all my eggs in the one broker basket in the admittedly unlike event of a major problem at one or the other, was worth the small administrative overhead.

[Aljie]

Thank you, this is obviously the major consideration for me at this point, and I have begun to look at different platforms, though it's going to be difficult to beat iWeb's charges. But I take the point that this is the price I have to pay for the extra security

[stevensfo]

Thank you, this is obviously the major consideration for me at this point, and I have begun to look at different platforms, though it's going to be difficult to beat iWeb's charges. But I take the point that this is the price I have to pay for the extra security

Once your ISA gets to a certain amount, the charges are pretty much insignificant. I have ISAs with AJBell and ii. Both now have a monthly charge, but at least with ii, that charge includes dealing charges so is not that bad. i.e. every month, I have credit to use for dealing charges. I also have a very old -non ISA- Share builder account with Halifax that has cheap dealing days and also cheap dealing days for selling as well!

As I approach leaving paid employment (I hate the word 'retirement'!) I'm trying to move all the high div payers from Halifax into the ISAs and reserve Halifax for the Growth and acc. funds to lessen the effect of the lower dividend allowance.

Since iweb is part of Halifax, thus part of Lloyds, you probably have all these conditions as well.


Steve

[tjh290633]

As I approach leaving paid employment (I hate the word 'retirement'!) I'm trying to move all the high div payers from Halifax into the ISAs and reserve Halifax for the Growth and acc. funds to lessen the effect of the lower dividend allowance.

Since iweb is part of Halifax, thus part of Lloyds, you probably have all these conditions as well.


Steve

It doesn't necessarily follow. I'm with the Lloyds version. We do not get the low cost dealing days. Charges are slightly higher.

TJH

[1nvest]

FSCS compensation limit is £85K, against insolvency, not fraud. Fraud is infrequent but can have those who've 'lost their lifetime savings' when they do occur. Stocks are similar to banks, pooled 'deposits' where the depositor (investor) doesn't actually own the money (shares). Whilst supposedly separate/secure in some cases custodians and brokers can be under the same umbrella. Increasingly we're moving into a bail-in world, a directional push where investor/savers instead cover bail-outs instead of taxpayers.

Consider a investor that had opted for a Talmud style asset allocation, they own a £700K home, have £700K in a FT250 index tracker fund, £700K in physical gold. If the FT250 is wiped out they're down 33%. Contrast that with another that is 100% stock, and rents, a wipe out of the stock and they've lost all. In that particular example you can reduce the risk further, half in 2x leveraged FT250 (2MCL) half in gold tends to approximate 100% 1x, which revises the asset allocation to 33% home value, 50% physical gold, 17% 2MCL (2x FT250) - i.e. counter-party risk is reduced to 17% (83% of their wealth is in-hand, house and gold), a 17% loss is not that dissimilar to what the collective portfolio may naturally be down in some years, unpleasant, but isn't critical. As a aside that's also pretty tax efficient, no capital gains when you sell your primary home, no capital gains on Britannia or Sovereign Gold coins, 2MCL doesn't pay dividends and if held inside a ISA/SIPP doesn't involve CGT.