Ask ii: how does FSCS protection work in ISAs, SIPPs and cash?
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13th March 2025 08:53
A reader asks: I’ve read that only £85,000 is protected by the Financial Services Compensation Scheme (FSCS), so is my money safe if I have more than that in my interactive investor account?
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Sam Benstead, fixed income lead at interactive investor (pictured above), says: You’re right to say that the FSCS scheme only protects up to £85,000 per bank.
However, the picture is more nuanced when it comes to interactive investor and your cash, ISA, SIPP and General Investment accounts.
So, let’s break it down…our services are provided to you by Interactive Investor Services Limited, which is authorised and regulated by the Financial Conduct Authority (FCA). Your contractual agreement is with this company and your investments are registered in the name of Interactive Investor Nominee Services Limited.
Interactive Investor Services Limited is an investment firm and not a bank. Unlike a bank, your assets are never mixed with those of ii – they are kept in legally separate trusts solely for your benefit. A bank takes your money and uses it to issue mortgages and credit cards, and to speculate on the markets; ii purely administers your assets on your behalf. We do not lend your money. We do not trade.
But the one thing we have in common with UK banks is that customers benefit from FSCS protection.
Any investment you have has “trust status”, which means that in the event of the firm becoming insolvent your investments are protected from the firm’s creditors.
Any money (cash) held in your account is treated as “client money” as defined by the FCA. This means your money also has trust status, and is deposited across a range of bank accounts specially designated as holding client money. At no point does your cash enter an ii bank account.
We carry out due diligence on any banks we hold client money with and only place money with institutions which are covered by the FSCS deposit protection scheme.
Therefore, in the event one of those banks failed, you would be able to make a compensation claim. The FSCS deposit protection scheme and the current compensation limit is £85,000 per bank. Compensation limits apply per person, so any claim for compensation would need to include any deposits you hold directly with the same institution.
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In the event of Interactive Investor Services Limited being declared in default, and in the unlikely event of there being a shortfall between the assets held and your account balance, eligible customers would also be protected by the FSCS up to the same £85,000 per claimant.
To summarise, any investments you hold, via a fund or share, for example, are yours and do not need to be protected by the FSCS scheme. If ii fails, you’ll still have all your investments.
Any cash you hold is yours too, and we put it in banks to earn a return on your behalf. This money is protected by the FSCS scheme at £85,000 per bank used.
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.
Please remember, investment value can go up or down and you could get back less than you invest. If you’re in any doubt about the suitability of a stocks & shares ISA, you should seek independent financial advice. The tax treatment of this product depends on your individual circumstances and may change in future. If you are uncertain about the tax treatment of the product you should contact HMRC or seek independent tax advice.
Important information – SIPPs are aimed at people happy to make their own investment decisions. Investment value can go up or down and you could get back less than you invest. You can normally only access the money from age 55 (57 from 2028). We recommend seeking advice from a suitably qualified financial adviser before making any decisions. Pension and tax rules depend on your circumstances and may change in future.
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