Is My Money Safe?
At the height of the world economic crisis, many financial services providers came extremely close to failing. For the first time since the Great Depression of the 1930s, savers and investors were in real danger of losing money deposited in these financial institutions. Governments had to step in and ‘bail out’ the banks, but confidence in the financial system had been shaken. People began to ask themselves, ‘Is my money safe?’.
The Financial Services Compensation Scheme provides protection.
The Financial Services Compensation Scheme (FSCS) is the official body that can pay you compensation if your financial services provider fails (known as being in default) and you lose money as a result.
Am I eligible for FSCS compensation?
You will be eligible for FSCS compensation only if your financial services provider is covered by the Financial Services Authority (FSA). You can find this out by:
- checking the documents or official publications that your financial services provider has given you – the FSA authorisation number is often displayed.
- checking your financial services provider’s website – the FSA authorisation number is often in the ‘legal information’ section
- calling your financial services provider and asking.
- using the FSA Financial Services Firm Search which contains details of all financial services providers authorised to do business in the UK.
The FSCS covers UK financial services providers only.
The FSCS does not provide cover for any financial institution based outside the UK. The level of compensation available will be based on the rules and regulations, if any, applying in the particular country where the institution is based. It is worth noting that the UK does not include the Channel Islands or the Isle of Man. These are known as Crown dependencies but they are not part of the UK.
What compensation am I entitled to?
There are limits to how much the FSCS can pay in the event of a financial services provider going into default. The limits depend on the financial services product you hold. You can find a list of financial products and their corresponding compensation limits on the FSCS website.
The compensation limit for deposits in current and savings accounts is £85,000 per person per authorised firm. This means that compensation applies to individuals rather than accounts, so for joint accounts the limit applies to each named account holder. For example, if you have a joint account with your spouse or partner, you could each make a claim of up to £85,000 under the deposit limits.
The FSCS compensation limit for deposits applies per FSA authorised firm, not per brand. This is important to know because some brands are actually part of a single authorised firm and, as a result, they share FSA authorisation. So if you have a current account with the Co-operative Bank and savings with Britannia, they are both part of one FSA authorised firm (Co-operative Bank plc) so your total compensation limit will be £85,000.
It’s worthwhile noting that if you hold both debts (such as a mortgage) and savings with a financial services provider that goes into liquidation, the way in which you are compensated can vary. This depends on various factors including the type of debt you hold with that particular financial services provider. To find out more about these compensation rules and regulations, visit fscs.org.uk
NS&I always guarantees 100% security for every penny of your savings.
NS&I is a government agency accountable directly to the Chancellor of the Exchequer and, as such, we are backed by HM Treasury. This means that when you invest in a savings account with NS&I, your total compensation is not limited to the FSCS £85,000 limit.
How can I find out if my providers share FSA authorisation?
There are various ways you can check whether your financial services providers share FSA authorisation. These include:
- taking a look at the table on the FSA’s website which shows which banking groups currently operate shared authorisation. If your bank or building society is not on the list, you should get in touch with your financial services provider directly to ask about its FSCS cover.
- comparing your deposit account providers’ FSA registration numbers to check if they are the same – if they are the same, they share authorisation.
- asking your deposit taker whether it shares a banking authorisation with any other firm.
How can I find out more about the FSCS?
Both the FSCS and FSA websites provide a wealth of information on the Financial Services Compensation Scheme and how to make a claim. The Money Advice Service website also has a comprehensive section about the FSCS. It’s worthwhile checking if your money is covered. That way, in the unlikely event that something should go wrong with your financial services provider, you’ll know whether or not you are covered.