FSCS protection on stocks and shares ISA/ funds

[TheBelmont]

I have a Vanguard stocks and shares ISA with about £75k and I make regular contributions into Ftse 100 tracker an S&P 500 tracker within that ISA. My DH has suggested looking for an alternative provider as I am getting near the £85k FSCS Protection limit and hopefully the value will grow….but I was a bit unclear on the rules around ISAs and I’ve not had much success googling!

Can I save beyond the £85k with Vanguard and still be protected? If not, what would you recommend as an alternative to Vanguard for cost and ease of use?

The £85k FSCS covers bank deposits not investments so it not relevant to a stock and shares ISA.

It covers you if Vanguard (or more to the point, custodians) go tits up with your money.

But they won’t, because unlike banks asset managers don’t invest with their own balance sheet.

The FSCS won’t cover you if the value of your investment goes down - that’s the risk you’re taking. The flip side is that you hope the investment grows, unlike in a bank account where (because of inflation) your money is almost guaranteed to lose value.

Totally understand FSCS doesn’t cover the valuation drop…it was more in the case of a failure of Vanguard itself. Is it sensible to keep investing with them beyond the £85k FSCS protection limit then? (sorry I may be being a bit dim) or advisable to start new ISA with a new provider in April?

m.youtube.com/watch?v=YcjKlxAYEEE

If the platform (such as Vanguard Investor) becomes unviable, then I would anticipate that it would be taken over by another provider. It could mean that there is no access for a while but the underlying investments are still there.

If Vanguard as the fund house was to fail, then as long as the funds did actually buy the stocks they claimed to have brought, those stocks could be sold by the liquidator. There would be admin costs involved but investors may get back most of their investment.

There is risk by having all investments with one fund house. However I am not fussed about it with a large provider like Vanguard, in the same way if it was all with Fidelity.

If you want to reduce your risk, then having investments within other funds may be useful. On platforms like AJ Bell, HL, you can do that easily as you can hold funds on those platforms from Vanguard, Fidelity, L&G and many others.

If you decide to have more than one ISA you need to be careful to not breach the rules. Such as not paying money into the wrong account, thus in the same tax year money is paid to two S&S ISA accounts - which would breach the rules.

Thank you for the video. This feels very complicated! Both my tracker funds invested with Vanguard are vanilla ETFs so I am assuming domiciled in Ireland but are Vanguard “branded” funds. I think in this case FSCS protection is a red herring as it wouldn’t cover me at a fund level anyway as not UK domiciled funds…only at the Vanguard UK platform level (so if the platform becomes insolvent) and even then the underlying investments should remain intact less any administration free which is reclaimable from FSCS?
So I’m concluding that it is pretty safe to keep adding next years ISA contributions to Vanguard even though it will take me over the FSCS limit as my funds will have no less protection than they have now (as they don’t have any FSCS protection at the fund level). Do shout if anyone thinks I’ve got that totally wrong!

No such thing as vanilla ETF.

Frankly the FSCS is covering you for fraud and little more. Vanguard own assets with your money, so their failure is irrelevant.