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Keeping your savings protected

Keeping your savings protected

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There was a time when no one thought twice about placing money in a bank or building society for safe keeping. And then we had the financial crisis and a few big name banks collapsed. Panic set in. While this may now seem like a distant nightmare it has left a scar that may never completely heal. Trust has been broken. We need to know how safe our money is, and the key to that is information. Here are some useful facts all savers and investors need to know.

Government Protection

In the wake of the financial crisis the government backed a new Financial Services Compensation Scheme (FSCS). This means that in the event of the failure of a UK Regulated bank, building society or credit union that is covered by the FSCS, a portion of your money is protected. Individuals can get back up to £85,000 each per financial institution. This applies equally to savings accounts, current accounts, and ISAs. While most money should be available within a week, some may take longer to be released, presumably depending on the nature and complexity of the reason behind the problems.

The meaning of ‘UK Regulated’

Savers and investors need to understand that not all UK accounts fall under the umbrella of those that are ‘UK Regulated’. There is no hard and fast rule on this. All foreign owned banks from outside the EU are UK Regulated. Yet a few EU owned banks are not. They are allowed to offer services in the UK under a ‘passport’ scheme with terms that are backed by their home government. If these banks fail you would have to claim from the foreign government direct – nowhere near as simple.

The Joint Account Factor

If you have funds in a joint account then it is considered you own half each. So for a single joint account the protection would be £170,000 (two lots of £85,000).

Institution vs Account

Keeping your savings protectedBeware – the £85,000 protection limit per person applies to each separate institution, NOT to each separate account. If you have a joint and individual accounts with the same bank your guaranteed protection only amounts to £85,000 in total with that institution, across all your accounts. The safest idea is to spread your assets across a number of different institutions, with the aim of leaving no more that £85,000 per person in the hands of each one.

Beware of Mergers

A number of big name institutions are now ‘sisters’. Halifax and Bank of Scotland, for example, fall into this category. It means that your protection amounts to £85,000 in total for accounts held across BOTH of these institutions. Don’t get caught out in this way. Do your homework before you place your cash.

SIPP Savings

For those with cash savings under a Self Invested Personal Pension there is additional protection. The cash element (as opposed to investment) of the Pension holdings also fall under the protection of the FSCS. The same rule of the £85,000 maximum per institution still applies, so check with your SIPP provider to see where any cash elements of your pension are being held.

At a general level the protection offered by the FSCS looks pretty solid. Many ordinary folks won’t have sufficient savings to worry too much about where their cash is placed, and those who do can work the system to their advantage by spreading their risk across several different institutions. It all looks good on paper, but how the payout system would work in practice if your bank failed remains untested. I guess it’s to be hoped that we never have to find out.







About Cally Worden

About Cally Worden

Seasoned freelance writer Cally Worden lives with her family and dog in a quiet corner of rural France. A love of the outdoors, and a fascination with her children's ability to view life with fresh eyes provide the inspiration for much of her work. Cally writes regularly for various websites and UK print publications on subjects as diverse as parenting, whatsapp plus,travel, lifestyle, and business, and anything that makes her smile.

Website: Cally Worden

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