Tue 06 Mar 2018 // #Saving
(Only got a minute? This is what you need to know)
(Reading time: 4.6 minutes)
The last thing you want to happen is to lose your savings. You’ve (probably) worked hard for them, maybe have plans for them and to lose them could be totally devastating. Luckily, your savings are somewhat protected for a disaster scenario.
As a general rule of thumb, savers are protected for cash amounts up to the £85k limit held at each regulated financial institution or bank. This is thanks to the Financial Services Compensation Scheme, which covers all UK-regulated current or savings accounts as well as cash held in ISAs or SIPPs.
This is important: it’s £85k compensation limit per regulated institution, not £85k per account. So, for example, holding £170k split across two different accounts at PotentiallyRiskyBank Ltd is no good. If PotentiallyRiskyBank Ltd goes bust, then you’ll only be protected and compensated for £85k. However, if you had £85k in an account at PotentiallyRiskyBank Ltd and had another £85k at DefinitelyRiskyBank Ltd, you would be able to recover 100% of your savings if both banks go bust.
The tricky bit is knowing what banks are actually a part of the same authorised financial institution. Because if DefinitelyRiskyBank Ltd from the example above is actually a subsidiary of PotentiallyRiskyBank Ltd, and they are regulated under the same authorisation, then you’d only be able to recover the compensation limit of £85k from the FSCS. And it’s not always immediately obvious that banks are part of the same institution just from their name. A real life example is if you held £85k in an account at Halifax and another £85k at Bank of Scotland, you are only protected for £85k, as the banks are part of the same financial institution. As a quick guide, we’ve compiled a list below of the banks which are covered by the FSCS and a summary of which banks are linked together as part of an institution for FSCS compensation limits purposes.
Even if you don’t have savings in excess of £85k, it may be prudent to spread your savings across two different banks, as if a bank collapses, you may have a period of time where your savings are completely inaccessible.
Cash in joint accounts are treated as being protected for £85k compensation per person. So together, the joint account is protected for up to a £170k limit.
Whenever you open a stocks and shares account it's prudent to read the details on the provider's website about how safe your money is. Importantly, make sure you use a reputable provider. Many investment accounts will hold your funds in segregated accounts, which means that even if the account provider fails, your money will still be intact (although it may take a little while to get your money back). In a really bad scenario the Financial Services Compensation Scheme will cover you for compensation claims of up to £50,000 against each financial institution. We will write about this in detail in a later post.
The following shows the regulated institution plus the brands associated with it. Remember: If you have multiple accounts within the same group of institutions, you will only be protected by the FSCS for £85,000 in compensation in total.
AIB (UK) PLC:
Arbuthnot Latham & Co Limited:
Bank of Ireland (UK) plc:
Bank of Scotland plc:
Barclays Bank plc:
Charter Court Financial Services Ltd:
Clydesdale Bank plc:
The Co-operative Bank plc:
GE Capital Bank Limited:
HSBC Bank plc:
Julian Hodge Bank Limited:
Lloyds Bank Plc:
Paragon Bank Plc:
The Royal Bank of Scotland plc:
Santander UK plc:
Yorkshire Building Society:
The following brands are regulated as their own entities, so accounts will be protected at each of these institutions up to the maximum £85,000 limit per person.
This list is correct as at December 2017. You can learn more from the Bank of England’s website.