Are Investment Funds Protected By FSCS? | Clear View

Yes, many UK investment funds are covered by the FSCS when a regulated firm fails and you meet the eligibility criteria.

When you put savings into an investment fund, you want to know what happens if the provider itself runs into trouble. That is where the Financial Services Compensation Scheme (FSCS) comes in. It acts as a backstop when authorised firms collapse, so ordinary investors are not left dealing with the fallout alone.

This article explains how FSCS protection works for investment funds, what the limits look like in practice, and where the gaps sit. By the end, you will know when your fund holdings are likely to be covered, when they are not, and what steps help keep your money safer across different providers.

FSCS Protection For Investment Funds In The UK

The FSCS is the UK’s statutory compensation scheme for customers of authorised financial firms. It is funded by the industry and set up by law to step in when a regulated bank, platform, adviser, or insurer cannot meet its obligations. For investments, the rules are made and overseen by the Financial Conduct Authority (FCA), while deposit rules sit with the Prudential Regulation Authority (PRA) and are explained in the Bank of England’s FSCS explainer.

For investment business, the FSCS can pay up to £85,000 per eligible person, per firm, where the firm has failed and there is a financial loss. This level applies to most retail investments, including many mainstream funds and pensions arranged through UK-regulated providers. The separate deposit limit for cash savings with banks and building societies has risen to £120,000 per person, but that higher figure does not extend to investment funds at the time of writing.

In simple terms, FSCS cover for investments does not protect you from market ups and downs. It only comes into play when something has gone wrong at the firm level, such as insolvency, fraud, or bad advice meeting specific rules. The FSCS investment pages stress that it steps in when a firm cannot meet its obligations, not when markets move against you.

When FSCS Helps With Investment Funds

FSCS protection for investments normally appears in a few recurring situations:

• The fund platform or stockbroker fails. Your shares or units in funds should be held in a ring-fenced client account. If there is a shortfall when the firm goes under, the FSCS may compensate you up to £85,000 for that loss.
• The fund manager or product provider collapses. If a UK-authorised provider cannot return assets that belong to you, or there is proven mismanagement covered by the rules, FSCS compensation can fill the gap within the same limit.
• You received bad advice from a regulated adviser. Where a regulated adviser recommended unsuitable funds and you suffered a loss, you may be able to claim up to £85,000 for that advice if the advice firm has shut down and cannot pay redress.
• There has been fraud at an authorised firm. If a regulated business misused client money or assets and then failed, FSCS protection can apply to the losses linked to that misconduct.

In each case, the focus is on whether an authorised UK firm did something wrong, cannot meet its obligations, and you qualify as an eligible claimant. The FSCS has its own eligibility rules that exclude some categories of claimant, such as certain large companies and professional investors.

When Your Investment Fund Is Not Covered

FSCS cover does not extend to every investment fund or every type of loss. Common gaps include:

• Unregulated or offshore schemes. Many high-risk or niche collective schemes are outside the UK regulatory net. The FCA describes many of these as unregulated collective investment schemes (UCIS). If they are not authorised or recognised, FSCS protection normally does not apply.
• Non-UK or unregulated providers. A firm must be authorised by the FCA or PRA, or an equivalent body in certain circumstances. If the firm sits outside that system, you usually fall back on local rules in that country instead.
• Cryptoassets and many structured products. Some newer products sit outside FSCS cover, especially when the underlying asset itself is unregulated or traded on unregulated venues.
• Peer-to-peer loans. Many P2P lending platforms make clear that FSCS cover does not apply to losses on the loans themselves, even if some money in client accounts has a separate form of protection.
• Normal investment losses. If your fund falls in value because markets drop, that is an investment risk, not something FSCS will reimburse.

Because the line between regulated and unregulated products can be narrow, it is wise to check carefully before you invest. The FCA Financial Services Register lets you confirm whether a firm is authorised, and the FSCS investment types list explains which investment categories usually qualify for protection.

Are Investment Funds Protected By FSCS? Rules In Plain Language

So, are investment funds protected by FSCS? The short answer is that many mainstream UK funds sold through authorised firms do fall under the scheme, but the cover is not universal. You need three broad ingredients for FSCS help to be on the table:

• The firm you deal with is authorised in the UK for the relevant investment business.
• You are an eligible claimant under the FSCS rules.
• There is a defined failure, such as insolvency, fraud, or regulated advice that caused loss.

If those boxes are ticked, FSCS compensation for investments can reach up to £85,000 per person, per firm. This limit applies whether you held unit trusts, OEICs, investment trusts purchased through a platform, or pension funds within a self-invested personal pension. The cap is not a target; it is a ceiling on how much you can expect if the worst happens.

It also helps to separate the firm that looks after your money from the underlying investments. In many cases, your funds are held in nominee or trustee arrangements, so they remain in your name. FSCS protection mainly sits in the background for the small chance that those arrangements break down and the assets cannot be fully returned.

Which Investment Funds Generally Qualify?

As a rough guide, the following fund types often sit within the FSCS safety net when bought through an authorised UK firm:

• UK-authorised unit trusts and OEICs held on a regulated investment platform or through a stockbroker.
• Authorised investment funds inside a stocks and shares ISA or a self-invested personal pension operated by a UK provider.
• Model portfolios or discretionary managed portfolios that invest in authorised funds, where the manager and platform each hold the right permissions.
• Insurance-based investment bonds sold by UK-regulated life companies, where FSCS protection can apply under insurance rules.

These are general patterns, not promises for every product. Each fund, wrapper, and firm has its own structure. Always read the protection section of the literature and check the relevant firm on the FCA Register if anything is unclear.

Common Fund Types And FSCS Coverage

Investment Product	Usually FSCS Covered?	Main Conditions
Unit trust or OEIC on a UK platform	Yes, for firm failure	Platform and fund manager must be authorised; limit £85,000 per person, per firm.
Investment trust held via stockbroker	Yes, for broker failure	Cover applies if the broker cannot return your shares and is in default.
Stocks and shares ISA with UK provider	Yes, for platform or custodian failure	Underlying funds still carry investment risk that is not covered.
Self-invested personal pension (SIPP)	Yes, in many cases	Protection can apply to SIPP operator failure and to bad advice on underlying funds.
Unregulated collective investment scheme	No, in most cases	Often outside FSCS cover; only advice on the product may qualify.
Cryptoasset fund or exchange token	No	Cryptoassets are generally unregulated; FSCS protection usually does not apply.
Peer-to-peer lending portfolio	No, for loan losses	Some cash held in client accounts may be protected separately, but not defaults on loans.

How The £85,000 Investment Limit Works

The investment protection limit can look simple on paper, but it helps to see how it plays out in everyday setups. The headline figure is £85,000 per eligible person, per firm. That means the name on the account and the firm’s regulatory licence both matter.

Per Person, Per Firm, Not Per Account

If you hold several investment accounts with the same platform, you do not get a fresh £85,000 allowance for each one. Instead, all your eligible investments with that firm are added together. FSCS protection then applies to the total loss across those accounts up to the single £85,000 cap.

In contrast, if you split money between two completely separate authorised platforms or stockbrokers, each firm carries its own £85,000 limit. A failure at one would not use up protection at the other. The risk you care about is the failure of the firm, not short-term swings in the value of the funds themselves.

How Wrappers And Nominee Accounts Affect Protection

Most long-term investors now hold funds through wrappers such as ISAs, pensions, or general investment accounts. Behind the scenes, the platform or SIPP provider usually holds assets in pooled nominee accounts. You still remain the beneficial owner, but your name may not sit directly on the share register.

If the platform or SIPP operator fails and there is a shortfall in client assets, FSCS cover can apply for that missing amount within the usual limit. Where an underlying bank that holds client cash fails, the separate deposit protection rules come into play instead, which now cover up to £120,000 of eligible cash savings per person, per authorised firm.

Joint Holdings, Trusts, And Children’s Accounts

The way FSCS treats joint accounts and trust structures can make a difference to how much protection your household has in total:

• Joint investment accounts. Each named holder normally has their own £85,000 limit for that firm, so a two-person joint account could benefit from up to £170,000 of investment protection in total.
• Trusts and bare trust accounts. Where investments are held for a child or beneficiary, the rules look at the underlying beneficial owners. Protection is then shared out across those people.
• Corporate or charity investors. Some organisations qualify for FSCS cover, others do not. The scheme has detailed eligibility rules, so specialist advice may be needed for bigger structures.

Practical Ways To Check Your FSCS Investment Protection

FSCS cover is automatic; you do not need to register for it, fill in forms in advance, or pay a separate fee. That said, a few simple checks help you understand exactly what safety net sits behind your investment funds:

• Check the firm on the FCA Register. Make sure the platform, adviser, or provider is authorised for the type of investment business you are using.
• Read the product literature. Look for sections headed “How you are protected” or similar, which should explain whether FSCS rules apply and under which category.
• Visit the FSCS investment pages. The scheme sets out which investment activities it covers and explains how claims work when a firm fails.
• Spread money across firms if large amounts are involved. Using more than one authorised provider can help you stay within the £85,000 per-firm limit, though it also adds admin.

Once you know which firms you use, which licences they hold, and which category of claim would apply, you can judge how comfortable you feel with the level of protection available.

Example Outcomes For Different Scenarios

Scenario	FSCS Likely To Help?	Possible Outcome
UK platform fails with £60,000 shortfall in client assets	Yes	Eligible investor may receive full £60,000 back through the FSCS.
Authorised adviser mis-sold high-risk fund; loss of £40,000	Yes	If the advice firm is in default, FSCS may pay the £40,000 loss.
Investor holds £150,000 across funds on one platform; £90,000 shortfall on failure	Partly	FSCS cover capped at £85,000; investor may still lose £5,000.
Investor holds £100,000 on each of two separate platforms; both fail with £60,000 shortfalls	Yes, for both	FSCS may pay £60,000 from each firm, as each sits within the £85,000 limit.
Unregulated overseas fund collapses; provider not authorised	No	FSCS cover unlikely; investor relies on foreign rules or insolvency process.
Authorised crypto platform hacked; cryptoassets stolen	Unlikely	FSCS rarely covers crypto losses; outcome depends on platform structure.
Fund falls 30% due to market crash	No	No FSCS payout; this is normal market risk.

Practical Takeaways On FSCS And Investment Funds

FSCS protection gives investors a safety net when authorised firms fail, but it does not remove risk altogether. Your investment funds still rise and fall with markets, and some specialist products have no cover at all. The scheme is there for firm failure, bad advice, or fraud within regulated businesses, not for poor performance or normal volatility.

For most long-term savers using mainstream UK funds through authorised platforms, the message is reassuring. Up to £85,000 per person, per firm sits behind eligible investment business, and a higher £120,000 limit now applies to many cash deposits held in banks and building societies. By spreading larger sums across more than one firm, choosing regulated providers, and reading the paperwork around protection, you can line up your investments with the safety net that fits your comfort level.

None of this replaces personalised financial advice. It simply sets out how FSCS protection tends to work for investment funds so you can ask better questions of providers and advisers when you decide where to hold your money.