What happens to my investment if a unit trust or a fund manager goes bust?

This is very much dependent on the type of tax wrapper and the platform provider you use and if you require clarification you should seek a definitive explanation from your platform provider.

As a rule of thumb there are two potential implications. The first is if your platform provider goes bust and the second is if an investment company running one of the funds you are invested in goes bust.

With the platform providers, all investor assets should be segregated from the assets of the company you are invested with thus avoiding any issues should the company go bust. However if the nominee accounts were not in good order and the segregation had not worked and there were insufficient assets to meet the company’s contractual obligation, then a claim may be made under the Financial Services Compensation Scheme (FSCS).

The level of protection that you gain from the FSCS is dependant on which type of tax wrapper you have. If you are invested in a unit trust, OEIC or bank deposit account then your protection is limited to 100% of the first £50,000 of any claim. This maximum is per client and not per account held with the platform provider.

Investment Bonds (both onshore and offshore) and pensions are considered to be contracts of insurance and as such, in the first instance, the FSCS would make arrangements to secure continuity through transferring your holdings to another firm or securing the issue of a substitute policy by another firm. If these actions were not possible the FSCS would provide compensation. The amount that can be claimed is 90% of the amount payable under the policies or contracts you have with the platform provider, with no maximum limit. This is per client not per account.

With the investment companies running the fund you hold on the platform they are again all subject to the Financial Conduct Authority’s regulations regarding segregation of client and shareholder assets, so in the event of liquidation, there shouldn’t be any client loss provided that the accounts have been kept in good order.