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Keeping your savings safe

Keeping your savings safe

You may have heard of the Financial Services Compensation Scheme. But what exactly is it, how does it safeguard your money and how can you make sure you’re covered? We take a look.  

Anelda Knoesen
From the Money team
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Posted 2 SEPTEMBER 2019

Protection if a financial firm fails

If you’ve applied for a financial product, such as a savings account, you’ve probably seen the words “FSCS protected’ on the details. 
Set up in 2001, the Financial Services Compensation Scheme (FSCS) can give customers protection if a financial firm fails.  
It offers compensation for deposits of up to £85,000, and up to £170,000 for joint accounts, if the financial firm you have your money with collapses. The amount is per person, and per bank, building society or credit union.  

However, some banks in the same group share a banking licence and are treated as one bank, which could affect the maximum of your pay-out. For example, HSBC and First Direct are treated like one bank, as are Halifax and Bank of Scotland (but Halifax and Lloyds Bank, although in the same group, are licensed separately). 

So when you open any new accounts, it’s worth checking whether you’re likely to breach the compensation limit for a particular bank or banking group, so you can put your money somewhere else to ensure it’s safe.   
You don’t have to make a claim if the bank fails. Your money should be paid automatically by the FSCS.

What’s covered by the FSCS? 

Products protected by the scheme include: 

  • accounts held with a bank, building society or credit union 
  • investments from a firm authorised by the Prudential Regulation Authority or Financial Conduct Authority  
  • pensions provided by UK insurance providers, but not final salary or defined benefit pensions 
  • life insurance and general insurance 

Temporary high balances 

You might have an unusually large amount of money in your bank account, perhaps due to selling a property or receiving an insurance pay-out. The FSCS protects temporary high balances of up to £1 million for up to six months. But you may have to provide proof of why you have the money – a property sale receipt, for example.

Is your money protected? 

  • The FSCS only covers companies authorised by the Financial Conduct Authority or the Prudential Regulation Authority.  
  • If your account is with a company based in the European Economic Area (EEA), you won’t be covered by the FSCS, but you may have protection from a deposit compensation scheme in the bank’s home country. 
  • You may have money with different banks that are actually part of the same banking group. If this is the case, the FSCS will treat them as one bank – so you’ll only be compensated up to the £85,000 (or £170,000) limit, regardless of how much you have in each account.
  • FSCS coverage begins at different dates for different types of products. For example, it won’t cover mortgage advice and arranging if this took place before 31 October 2004, as these weren’t protected by the FSCS before then. 
  • The FSCS can cover customers of firms that are ‘in default’ – that is, one that’s unlikely to be able or is unable to pay claims against it. If you have a dispute with a company that’s still trading, you might want to contact the Financial Ombudsman Service or the Citizens Advice Bureau. 

To find a list of regulated firms – and see whether they share a banking licence – check out the Financial Conduct Authority’s Financial Services Register. And you can see if your money is fully protected with the FSCS online Protection checker.

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