Are your savings safe?

October saw 12 banks and building societies have their credit rating reduced, including Lloyds, Santander, RBS, the Co-operative Bank, prompting many to question the safety of their savings.

The Financial Services Compensation Scheme (FSCS) is the UK’s compensation fund of last resort for customers of authorised financial services firms. It covers private individuals and some eligible smaller businesses against losses if a financial institution defaults. There are limits to this cover.

What does the FSCS cover?
For savings deposits held in a bank or building society account, the FSCS will cover you for 100 per cent of £85,000 per person per financial institution.

What classifies as a financial institution?
It is important to note that a financial institution is not necessarily a bank or building society on its own. Since the financial crisis began, a number of banks and building societies have merged, meaning that two may only class as one financial institution for the sake of the FSCS.

Essentially, a financial institution is separately authorised by the Financial Services Authority (FSA).

For example:
Halifax, Bank of Scotland and Birmingham Midshires, are all part of the giant HBOS group, and authorised by the FSA as HBOS Group, meaning that the protection limit is combined and you would only get £85,000 for all together.

Visit www.fscs.org.uk for more information.

What else does the FSCS cover?
As well as deposits, the FSCS also covers individuals and eligible small businesses for:

  • Insurance policies (for firms declared in default on or after 1 January 2010) – 90% of the claim with no upper limit. Compulsory insurance is protected in full.
  • Insurance broking (for firms declared in default on or after 1 January 2010) – 90% of the claim with no upper limit. Compulsory insurance is protected in full.
  • Investment business – 100 per cent of the first £50,000 per person per firm (for claims against firms declared in default from 1 January 2010).
  • Home finance (for claims against firms declared in default from 1 January 2010) – £50,000 per person per firm.