Bloomberg Audio Studios, Podcasts, Radio News. Welcome to Merrin Talks Your Money, the personal finance edition of Marin Talks Money. In these bonus podcasts, we talk about the best strategies for making the most of your money. I'm Maren thumsat Web and with Me Senior, a border and money Distilled author John Stapback. Hi. Hi, right, So this week we are answering a question from Mike.
I'd love to know your thoughts on the possible risks in having all of your DC pension invested in one fund, such as, for example, the Vanguard Life Strategy Fund, given that the FSCs limits are only eighty five thousand. I've kind of thought about this as my pension pot has increased. I've wondered if it should be spread around a number of similar passive funds from different providers.
Gosh, well, there's quite a lot in here because it's not really about one fund, but it's about one provider, isn't it.
Jump Well, the FSCs is basically where do you go if all the else fails and so, say you're broker goes bust, Say the platform that you're on goes bust, and then not only that it terms out, it goes
bust and your money isn't where it should be. Because the key thing if you're using a platform like how gas lines down or an interactive investor for example, then your assets should be separated so that even if the platform provided breaks down, then your money is there somewhere and then it's just a matter of trees there.
Yeah, I mean that's absolutely key. So everything that you hold in an ISA or a pension or anything like that is effectively held in a kind of trust structure for you. So whatever goes wrong at the broker, that structure still exists and your money is still inside it. So you only run into a problem where you might need back up from the FCFC if there's some kind of fraud involved or your money has been moved out
of these these trust structures into something else. Right, So it's it's incredibly unlikely unlikely that if you're broke a where to go bust, which does happen, if you're broke away to go bust, you might need recourse to them. Is that fair?
Yeah, it is unlikely. I mean it's obviously it would be a hassle in a nightmare if your broker goes bus, then brokers do go bust, smaller brokers. You know, over the years writing about this stuff, you know, there's always every kind of like three or four years is usually a story about some broker that most people probably haven't
heard of, and often what happens. One of the problems is that even if there isn't actual fraud, and sometimes it is fraud, but if there isn't freud, there's sometimes just really sloppy paperwork, and you know, the people who have got to go to the FSCs and having to wait for ages. That's broadly speaking, what this is for. And really, I do think that this is a really good question, because it's not like this is a similar
thing with bank accounts. So we all remember the financial crisis and how everyone actually got clued up on the FSCs very quickly after that, and we all know that you shouldn't hold more than eighty five thousand pounds with any one bank sort of like banking group, per person, because if your bank did end up having a run on it and there was another two thousand and eight situation, then you're only covered up to the eighty five thousand, excepting certain minimal circumstances.
And something to say there by the way, is that if you have cash, right, if you have cash at Hugger's, lamsown or one of the other broadkers, in one of those active saving schemes, whatever it is, that money is likely to be spread across different banks as well. And it's eighty five thousand for each of those.
Yeah, and that's both checking. If you're worried about it, then you should check with your platform exactly how it does that. And most of the you know, the platforms will explain that to you. The price should be something on their website, but if you can't find it, then just email and ask them about it.
Well, here, listen, I'll read you the bit from huggris lansdown website. Money you having an Isora funder a share account is held in legally separate trust accounts across the range. If you get regulated banks, this means your cash you're held separately to Hl's cash and it is reconciled daily. So that's the basics.
That a reputable platform will keep it an eye on all this stuff. This is something you really do have to consider if you're someone who does have more than eighty five thousand pounds, and frankly, if you have a pension that's going to be worth that's going to fund you in retirement, then you probably will have a pension
that's worth more than eighty five thousand pounds. And although things like brokers going bust doesn't happen very often, this is one good reason why you do need to keep an eye on the you know, the solvency of your broker, and the easiest way to do that is to use one of the big ones for at least art of your pension pot, even if you've got a broker that you prefer that's you know, smaller or more obscure or
cheaper or whatever. Because one of the important things with this kind of situation is how politically sensitive it is.
And if you can sit there and say, this company that I am invested with, would it going bust be a front page headline scandal story, I think answers yes, then that's actually an extra layer of protection for you because politicians will react if that happens, Whereas if it's just some pidly wee relatively recent startup that nobody else knows about, then you are going to be on your own as far as you know, getting your money back
goes beyond the connective SCS limits. So I think that's that's a really important element to think about if you are someone who's in the situation of, you know, being able to think about this.
Of course, that's not what startup brokers want to hear, is it that there are these these massive motes around the big guys for that very reason? But I agree with you, you know, it's one of the reasons to have a big name broke up. Interestingly, though, I still have my assets spread across three different organizations.
I think that's sensible for actually.
Come to think of it, simply simply because of admin. God, I hate admin. I hate admin, and I can't imagine having all my assets held on one platform it going bust and then two years of admin and form filling and all that. I don't think I could stand it.
Oh the way they'd be hairlish, and it's like, it's just there's different levels of here. There's there's a level of hell where you have to eat two years for your ices, and there's a level of hell we are your ices actually weren't near anymore.
That's the worst layer of hell. I don't think any of the organizations I'm with would get me into that situation. But you know, who knows, never say never, Terrible things happen out there in the world of money.
We know that, no, absolutely, And I think I think the other point, I mean, the answer makes questions specifically, actually question he's asking a little bit easier to my mind, because really what he's talking about is having it all in one fund. And don't get wrong, I mean, Vanguard falls very squarely into the headline, you know, political protections, kind of like a company if that went, but then that would definitely be a front page story. But you know,
it's very easy. He just put some of your money into a different passive fund that is doing basically the same thing. That's a fairly low ADMIN solution. I can see why you might not want to have more than one pension platform if you're only you know, if you're only just over the limit and you're like, oh god, I hate the ADMIN and I don't want to move money to you, and I don't want to do this.
But with that, that's just a pretty straightforward matter of taking a chunk of your pension money and putting it in a slightly different index fund.
I mean, I just think, I mean, I would never just rely on one fund for everything. I mean Vangguard Life Strategy Fund. I mean, this is a well established strategy, is a well established company. But why would you put everything into one thing? Ever? Ever, I mean, I don't think that the Vang Life Strategy Fund is going to end up being wound down. I don't think it's going to not have enough assets in it to be viable. You know, none of those things are likely to happen.
But again, why not just have a couple of different things?
Yeah, I think this is one of those questions a very basic level, just don't have all your eggs and one basket. Also, the more eggs you've got, the more baskets should going to required if you want to be able to sleep socadly and.
Obviously, I mean you can take eggs baskets, how many As you get more eggs, you need more baskets. Is that that's what you're saying, Yes, diversify, have a couple of baskets, move the eggs around them.
I think it's possible. Probably overly neurotic about this, but the deeper you want to go into it, I have to see I'm not you know, low with as I am to mention the competition. The money Vator blog is very good on this stuff for people who want to go deep down into you know, exactly which kinds of
funds are protected and all that sort of stuff. As I say, I think you can probably it would probably be easy to get a bit too you not to give about this, but at the same time it's definitely something you should think about, certainly, especially if you are going with small, more vulnerable providers, then you should be paying more attention to this stuff. You know, if you do have all your money we big brand names that have got that, you know, headline protection, then you can
probably be a bit more relaxed about it. But if it's anything off piecet, then just make sure you know what you're doing.
And just be clear that you know you can not this PARTICULARTF. But other atfs, they do get delisted, they do get wound down, and then you do wait for a bit of your money to come back, but it does come back. And it's the same with investment trusts for example. Every now and then they get wound down, right and then the money will the money will turn up in your bank account of it actually, and the
same with other types of funds. Okay, but one thing to add to that, John, and I think you know about this is that you do not get FSCs protection anyway from investment trusts and ETFs. Is that right?
Yeah? I mean that's moving in your or ticktatorory. If you're bordering a bit of that too much.
All right, well we'll leave it there. But the word last thing I wanted to mention is just to be absolutely clear, you will not get any compensation from the FSCs or indeed from anybody else if you just make a bad choice, if you choose a terrible fund and it falls ninety percent, I'm afraid that's on you. Bad choices have consequences, so let's try not to make too many of those. Thanks for listening to this week's meren Talk to Your Money. If you like us, share, rate, review,
and subscribe wherever you listen to podcasts. Also, be sure to follow me in John on x or Twitter at marinusw and John Underscore Stepic. This episode was produced by Semasadi, Production support and sound designed by Moses and Questions and comments on this show and all our shows are always welcome our show. Email is Marimony at bloomberg dot net.