Banks, building societies and credit unions will have to display signs telling customers their savings are protected by the Financial Services Compensation Scheme (FSCS), according to The Financial Services Authority (FSA), the financial regulator for the UK.
The move from the FSA comes after research found consumer awareness of the FSCS was extremely poor, despite a national TV ad campaign which cost £4m.
The signs will say “Your deposits are protected up to £85,000 by the Financial Services Compensation Scheme (FSCS), the UK deposit protection scheme. Any deposits you hold above this amount are not covered.” The requirement for advertising will involve all countries in the European Union, Liechtenstein, Norway and Iceland.
The FSA wants consumers to understand how their money is protected and about FSCS limits, which have changed since Northern Rock went bust in 2007, when the FSCS covered 100% of the first £2,000 and then 90% of the next £33,000.
Hector Sants, chief executive officer of the FSA, said: “It is vitally important that customers have confidence in the banking system and that is why we are taking this step of making it obligatory for firms to prominently display compensation information”.
Experts point out that whilst it is important savers are away of the limits of the FSCS it is also vital that they shop around for the best savings interest rates, especially at times of relatively high inflation.
Deposit accounts for SIPPs
It is also important that savers who hold deposit accounts for SIPPs are aware of the compensation scheme applicable to their account.
Not all providers of SIPP deposit accounts are members of the FSCS, it is therefore vital that anyone thinking of opening a SIPP deposit account, which is an allowable investment under HMRC SIPP rules, checks beforehand which compensation scheme is applicable and the limits which apply.
The Investment Sense deposit accounts for SIPPs best buy table shows which compensation scheme each bank or building society is a member of.