Savers have been urged to check that the money they hold with banks and building societies is within the compensation limits of the Financial Services Compensation Scheme (FSCS ).
The chief executive of the FSCS, Mark Neale, said that savers should feel reassured by the existence of the scheme but at the same time should also check their savings against the scheme’s limits.
FSCS compensation limits
The FSCS provides cover of up to £85,000 per saver per authorised institution. The limit applies per person; a couple would therefore be covered for £170,000 of savings, per authorised institution.
However a number of institutions operate under one banking licence and following the credit crunch of 2007 several banks and building societies have merged. This has lead to a potentially confusing situation and could lead to savers holding more than the £85,000 limit with one institution; potentially putting their savings at risk.
For example, Halifax, Saga, Bank of Scotland, Birmingham Midshires, the AA and Intelligent Finance all operate under one banking licence, meaning a saver with, for example, £100,000 saved with Bank of Scotland and Saga would only have £85,000 of their savings covered.
Another high profile example is the Yorkshire Building Society, which also shared a banking licence with the Chelsea and Barnsley Building Societies before it bought the Norwich and Peterborough Building Society as well as the savings arm of the internet bank, Egg.
Neale, said: “In these uncertain times consumers should feel reassured that the FSCS will continue to be there for them. All cash up to £85,000 for individual accounts and £170,000 for joint accounts is safe, as long as you do not exceed these limits for institutions authorised by the FSA.”
But he warned: “If you are not sure then check your money is protected.”
Check your savings
Savers have always been encouraged by financial experts to check they are getting the best savings interest rates, especially in these times of low interest rates and vanishing bonuses. However, with an increasing number of mergers, it is vital to also to check your savings are spread between different banking licences to ensure they are fully protected in the event that a bank or building society ceases to trade.
SIPP deposit accounts
Those people saving in deposit accounts for SIPPs should also regularly check their savings. Not only to make sure they are getting a competitive interest rate, but also that their savings are sufficiently spread amongst institutions and different banking licences.
It is also important to remember that when testing against the £85,000 limit, savings with a single institution held personally and inside a SIPP need to be added together.