How Safe is Your Money?

The Financial Services Compensation Scheme (FSCS) can pay compensation when an authorised institution is in default or has ceased trading. 

The FSCS are funded by the financial services industry through a levy imposed on IFAs such as ourselves, banks, building societies, investment groups and insurance companies, which are authorised by the Financial Services Authority (FSA).

The maximum levels of compensation are:-

Deposits - £85,000 per person, per firm (for claims against firms declared in default from 1 December 2010).

Investments - £50,000 per person, per firm (for claims against firms declared in default from 1 January 2010).

Insurance Business - unlimited - 90% of the claim with no upper limit.

What additional protection is in place for my investments?

• If you have £200,000 in a bank account your money will go on to their balance sheet and become a part of their assets, making you one of their creditors.  This means that if a bank goes bankrupt and there are no assets, you will have essentially lost all your money, aside from the £85,000 maximum cover under the FSCS.
  
  
• When you invest in a fund, your money does not go on the fund managers balance sheet, but is held separately by a custodian.  This means that if the fund manager goes bankrupt the money is still there and invested in the underlying assets.  There is also an independent auditor who checks that your money is managed correctly. 

What happens if I invest through a funds supermarket?

• If you invest through a funds supermarket such as Cofunds or FundsNetwork, the platform will act as the custodian of the units in your fund(s).  Your money will be kept separate from their balance sheet, so that if the platform goes bust your money will still be safe.  This will again be monitored by independent regulators.

What happens if the underlying assets go bust?

• If an underlying asset goes bust or performs badly you will not be entitled to any redress.  For example, if you have shares in a company that goes under, you will not get your money back.  However, the structure of a fund helps to diversify this risk by spreading your money across a range of investments so that if one does badly, you will not lose all your money.

The above is provided by way of guidance only and John Eames Limited accepts no responsibility for the correctness of the above.  It should not be relied on as a definitive statement of how the FSCS would apply.  The law and rules of the FSCS may change and/or the FSCS may take a different approach when applying its rules.