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Derin Clark

Derin Clark

Online Reporter
Published: 05/08/2020

The global Coronavirus pandemic is an unprecedented crisis that has highlighted the importance of having a significant amount of savings to fall back on in case of unexpected events. But while it is important to have money in the bank, the 2008/09 economic crisis showed that banks are not immune to failing during uncertain economic times. As such, we’ve taken a look at how safe savings are in the bank and how consumers can help protect their money.

Depositor protection scheme

Back 2001, the Financial Services Compensation Scheme (FSCS) was set up to replace former multiple schemes that were designed to help protect consumer’s finances. Under the FSCS, deposits of up to £85,000 in a sole account and £170,000 in a joint account are protected, meaning that even if the bank or building society collapses, savers will still be able to get their money back up to the limited amount. Any deposits over £85,000 (£170,000 for a joint account) that are deposited with the bank or building society, or any other brand under the same banking licence, are not protected under the scheme.

As such, savers should be careful that they do not accidentally deposit funds over the protected limit with a different bank or building society but who operate under the same banking licence, for example, although HSBC and first direct are different banks, they both operated under the same licence. Savers can find a full list of banks and building societies and the banking licences they operate under on our Depositor protection schemes guide.

Temporary high deposits protected for 12 months

An exception to the FSCS’ maximum limit of £85,000 is for temporary deposits, for example through a house sale or inheritance. Normally, temporary deposits of up to £1 million are protected for six months, but the Bank of England has announced a new temporary regulation that, starting from Thursday 6 August 2020, will see temporary deposits of £1 million protected for a 12-month period. This temporary measure will last until 1 February 2021, after which temporary deposits of £1 million will revert to being protected for six months.

How to keep your savings safe

The easiest way to keep savings safe is to ensure that savings are deposited in banks or buildings societies that are protected by the FSCS. If the bank or building society operates under a foreign licence, deposits can still be protected depending on the rules and regulations of that country, for example banks operating in the European Economic Area (EEA) are protected under the EU and EEA deposit protection, under which a maximum of €100,000 is protected per individual per bank. More information about this can be found in our Depositor Protection Scheme guide.

Once savers have ensured their money is deposited with a regulated bank or building society that operates under a protection scheme, they should then ensure that they spread savings above the £85,000 protected limit (£170,000 for joint accounts) across banks and building societies that operate under different banking licences. If their bank or building society announces a merger with another financial institution, savers should check that their money will remain protected after the merger.



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