The value of keeping your savings protected should never be underestimated. While a bank going bust in this day and age is highly unlikely – stringent rules have been put in place since the financial crisis to prevent big banks from failing – having peace of mind that your savings really will be protected, no matter what happens, is undoubtedly reassuring. That's where the Financial Services Compensation Scheme (FSCS) comes in.
The FSCS protects your money if your bank, building society or credit union fails for any reason. However, there's a cap – it covers up to £85,000 per person per banking institution, which means if you've got more than this amount squirreled away, it may be worth splitting it between a few different providers for complete financial protection. Just make sure those providers aren't run by the same parent company under the same banking licence; you can find out by checking here.
This is the best way to make sure your savings are completely protected. As long as you have less than £85,000 saved with any one institution, you'd be able to get it back should the worst happen, and you needn't even worry if you're saving with a smaller bank – provided the challenger is covered under the FSCS, so is your money.
There are some slight differences if you're banking with a foreign provider, many of whom will operate under the Economic Area (EEA) passport scheme. This means that your savings will be protected by the depositor protection scheme of the country in which the bank is licensed, not the UK scheme, but given that most operate similar schemes and cover up to €100,000, you should still have little to worry about.
It's perhaps little wonder that people feel reassured by having such financial protection, particularly in times of uncertainty. Indeed, research by the FSCS shows that 83% of respondents feel reassured knowing that the scheme exists to protect their money, up from 77% in March, as general economic uncertainty continues.
It isn't only well-off savers who benefit, either, with 66% of respondents believing that the FSCS benefits everyone, regardless of how much they have saved. Consumers' trust in banks and building societies that are FSCS-protected remain heightened, with an average score of six out of 10, with 76% feeling confident their money is safe when they know about FSCS.
Mark Neale, FSCS chief executive, commented on the findings: "FSCS continues to protect people if their bank, building society or credit union fails. Following the limit increase earlier this year [the limit was raised from £75,000 to £85,000 in January as a result of market fluctuations], the scheme protects even more of people's savings.
"Providing reassurance to people that their money is safe is our priority. I am pleased that more people feel reassured by the Scheme. It is also encouraging that trust in banks, building societies and credit unions protected by FSCS remains strong in what has been a year of changes in the UK."
The FSCS provides valuable reassurance that your money is protected, but you also want reassurance that your savings are working as hard as possible. That's why it's vital to keep an eye on your returns as well as your savings rate – if either could be improved, it's time to compare alternatives, particularly given that fixed savings rates have been rising of late.
Use our Best Buys to find the best savings rates on the market, and if you make sure to check that your deposits will be protected under the FSCS (or at the very least, the European equivalent), you can have peace of mind that your money isn't going anywhere.
See what depositor protection schemes are available if your bank goes bust
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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.