Am I in danger of losing half of my money?

Q: I have invested more than £90,000 in a stocks and shares ISA with Legal & General (L&G) by putting away a small amount each month since ISAs were launched and using up my annual allowance before the end of each financial year.

My concern is that the Financial Services Compensation Scheme (FSCS) only protects up to £50,000 of investments. Does this mean in the event of L&G getting into trouble, I am in danger of losing almost half of my money? Or are equity ISAs safer as my money is invested in stocks and shares and not in L&G's coffers?

Justin Modray is a a former independent financial adviser and the founder of candidmoney.com.

A: Well done on building up a nest egg. You're right, the FSCS only covers up to £50,000 per investment firm, so in a worst-case scenario your L&G investment wouldn't be fully covered.

However, the risk is not that high because your money is held within a unit trust, meaning if L&G went bust your money should be separately ringfenced. So I wouldn't worry about the worst-case scenario too much, but on the basis we should never say never it's probably a good idea to split your investments to ensure your money is fully protected by the FSCS.

Given the size of your ISA, it would make sense to diversify across different fund managers and types of fund. This will reduce the risk of losing money if a fund or market performs badly.

WHAT IS THE FSCS?

The Financial Services Compensation Scheme (FSCS) provides a financial guarantee to savers.

It can pay compensation to consumers when a financial services firm, such as a bank or investment company, is unable to pay claims against it. For most people, this means that if they have an account with a bank or investment company that goes bust and can't repay deposits, they can regain their money from the FSCS.

Savers are covered for up to £85,000 per separately licensed bank. The surge of takeovers and mergers of banks in recent years means there are some banks that share a licence, for example Halifax and the Bank of Scotland. In such cases, you are only covered for £85,000 across both firms, so if you have large sums with numerous banks be sure to check that they all have separate banking licences.

Investment limits vary but most types are covered up to a maximum limit of £50,000 per separately authorised institution.

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