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Many savers unaware of compensation scheme

Many savers unaware of compensation scheme

Category: Savings

Updated: 14/03/2011
First Published: 14/03/2011

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Less than half of consumers are aware that Cash ISA savers would get their money back if their provider went bust.

Just 49% of people are aware that they would be compensated, research conducted by the Financial Services Compensation Scheme (FSCS) shows.

The scheme protects insurance, investments and deposits and has paid out more than £24 billion in compensation since 2001 when financial firms, such as Icesave, have gone bust, leaving people out of pocket.

Despite this, almost four in ten people (38%) said they did not know if savers would be compensated, while 13% thought that they would receive no money back.

Men are significantly more likely than women to be aware of the existence of a compensation scheme (55% vs. 43%). There is also a generational gap with only 34% of those aged 16 to 24 being aware of the protection the FSCS provides, compared to 64% of those aged 55 to 64 years old.

The research also shows that only 10% are aware of the new compensation limit of £85,000 for deposits which came into effect on 31 December 2010.

A further 20% think the limit is £50,000, which was the previous limit. Two in five people (43%) said they do not know what the compensation limit is. Only 6% think there is no limit.

"The FSCS protects people who are customers of UK-authorised financial services firms," Mark Neale, chief executive of the FSCS, said.

"It is concerning that less than half of all adults are aware that ISA savers are protected if their provider goes bust.

"Despite low interest rates, ISAs are extremely popular products and it is important that people know their money is safe as long as it is held with an institution which is authorised by the FSA. The FSCS was set up by Government to protect consumers, is independent and funded by the industry."

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Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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