Thousands of cautious investors in "capital protected" products had a shock last week when Keydata Investment Services, a fund manager that provided the plans, went bust.
It took authorities 24 hours to confirm the safety of funds held by the firm for its 80,000 investors and all payments have been stopped.
About 35,000 people who have invested in the plans through Isas also face uncertainty, however, because the status of their tax relief remains unclear.
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Keydata was one of the biggest sellers of structured products - investment plans that purport to guarantee your capital while providing a return linked to a stock-market index.
The products became notorious last year when it emerged some were backed by Lehman Brothers, the failed investment bank, and were not covered by the Financial Services Compensation Scheme (FSCS). Keydata was not in the same position, but the insolvency has, nevertheless, renewed investors' safety fears.
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Meanwhile, West Bromwich building society reported a pre-tax loss of nearly £50m on Friday and narrowly avoided being taken over by another society after the Financial Services Authority (FSA) came to an agreement with holders of its debt. Analysts said a merger was still a possibility, with Coventry or Skipton in the frame. Under the terms of the FSCS, savers with up to £50,000 in each society would keep their separate compensation limits - although new depositors would not get such protection. We look at the rules.
Fund managers
Why did Keydata collapse?
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The Financial Services Authority, the city watchdog, declared Keydata insolvent after an investigation found the firm mis-sold Isa plans.
The plans - secure income bonds and defined income plans - comprised US investments known as life settlements, which the Revenue determined were not eligible to be included in an Isa wrapper. (See Bill Kay, p4) This triggered a tax liability - thought to be £5 million - which the firm could not afford.
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Is the money protected?
Administrators Price Waterhouse Coopers confirmed last week that Keydata investors' money is ring-fenced, including that held by the firm on behalf of Leeds, Derbyshire and Cheshire building societies - so any potential creditors would not be able to access these funds.
Venture capital trusts run under the Keydata brand are separate legal entities and are not subject to the administration.
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While their money may be safe, the 35,000 people who invested £250 million into 24 different Keydata products through Isas could lose their tax relief. PWC is still in discussions about this with HM Revenue & Customs.
How safe are structured products?
FSCS protection is limited to covering default by the firm that sells the product to the client and may not cover default by other firms including the product's counterparty, such as Lehmans.
What about regular investment funds?
The position for regular investment funds, such as unit trusts and open-ended investment companies (Oeics), is clearer. Your money is ring-fenced, so if the fund manager went bust, it could not use the money to pay creditors. If this safeguard failed - because the fund manager has misused clients' funds, for example - the maximum you could claim under the FSCS would be £48,000 per person, comprising 100% of the first £30,000 and 90% of the next £20,000.
Funds held within an insurance wrapper - personal pensions or with-profit bonds - are covered in a different way. The first £2,000 is guaranteed and then 90% of everything else, if the insurer goes bust.
Banks and Building Societies
How much is protected?
Cash deposits up to £50,000 - or £100,000 for a joint account - are guaranteed, although it could take as long as six months to get back your money. The limit also applies to private banks that are authorised by the FSA, even though they usually tout for larger deposits.
The situation can differ with foreign banks. Savers with ING, the Dutch Bank, and Irish banks Anglo-Irish and Bank of Ireland, recently lost their protection with the FSCS. The Dutch authorities underwrite the first 100,000 in ING accounts, while the Irish government will guarantee 100% of savings.
Some banks attract part-protection under the FSCS. For example, Handelsbanken of Sweden has been taking large amounts from UK savers at two of its biggest branches in Birmingham and Nottingham. In the event of its default, savers would have to apply first to the Swedish scheme for 20,000 compensation, after which they could apply to the UK FSCS for the remainder up to £50,000. Last week, the European Central Bank provided a 3 billion loan to the Swedish central bank to help with the country's exposure to the troubled Baltic region, particularly Latvia. Handelsbanken said it was well-capitalised and did not need to boost deposits.
Stockbrokers
Client accounts are legally segregated from the firm's own funds. If the money goes missing, the FSCS would step in to compensate investors. Where a client holds cash, brokers usually deposit it into pooled nominee accounts across different banks. For example, Killik & Co's deposits are currently spread across Lloyds, HSBC, and Barclays. The account is held in the broker's name, however, under FSCS rules, each client's funds are guaranteed up to a maximum of £50,000 per client per bank.
Solicitors
Client accounts are supposed to be held on trust. However, where solicitors go bankrupt while holding funds on a client's behalf, it is necessary to apply to the Solicitors Regulation Authority (SRA) to get the money back.