Depositor protection schemes explained | moneyfacts.co.uk

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Published: 06/02/2019

At a glance

  • All banks and building societies listed by Moneyfacts are covered by a depositor protection scheme that would cover your money in the event the institution in question went bust.
  • This applies to offshore banks as well as UK-based entities.
  • Most UK savers will be covered under the UK scheme (the Financial Services Compensation Scheme), which covers up to £85,000 per person per banking licence.

To prevent the financial collapse of a bank from having disastrous effects on your savings, banks and building societies offering their services to UK savers must be covered by a depositor protection scheme, which safeguards the money in your bank account (up to a certain amount) against their financial troubles.

As the Brexit transition period is over, banks must now operate in the UK as a UK-authorised institution, or under the UK regulators’ Temporary Permissions Regime. This is an interim stage where the bank intends to become authorised in the UK but has yet to be granted permission by the UK regulators. Their UK customers’ deposits are protected by the FSCS during this period so have equivalent protection to authorised UK banks. Additionally, offshore banks and building societies operating in the crown dependencies of Gibraltar, Guernsey, Isle of Man and Jersey, as well as those from the Isle of Man will have different compensation limits to that offered by the UK Financial Services Compensation Scheme. These are not affected by the UK leaving the EU.

Depositor protection schemes; what and how much is covered?

The depositor compensation schemes have different rules and limits in differing areas. You can find the relevant depositor compensation schemes by jurisdiction below.

United Kingdom

The Financial Services Compensation Scheme (FSCS) protects your cash deposits up to £85,000 for a sole account and £170,000 for a joint account.  Some banks and building societies share their banking licence and protection limit across multiple brands and subsidiaries. When this is the case the protection limit is shared as one maximum across all the brands.

The only exception to this rule is if you have a temporary high balance, for example though a house sale or inheritance, then up to £1 million per person per banking licence is protected.  Up to 1 February 2021 a temporary high balance is covered for 12 months. After this the maximum period reduces to 6 months.

If you have borrowed from the bank or building society, your savings will not be used to reduce or repay your debt. Separate arrangements will be made for this.

 

European Economic Area

Previously, banks regulated in other European Economic Area (EEA) member states could operate in the UK without UK regulation under a process called 'passporting' which meant they were regulated by the home country's regulator and covered by its compensation scheme. The passporting scheme ended on 31 December 2020, from when all banks operating in the UK must be authorised by the UK authorities. A small number of banks are operating in the UK under a temporary UK permission described above.

Any money you previously deposited with an EU bank will be covered by that country’s deposit protection scheme if they have chosen not to become a UK-authorised bank.

 

Gibraltar

If you have money deposited in a bank or building society in Gibraltar, then your money will be protected by the Gibraltar Deposit Guarantee Scheme. This protection is up to €100,000 deposited per bank licence for a single account and up to €200,000 for a joint account.

If you have funds over this amount they should to deposited with a bank or building society that has a separate licence to ensure all your money is protected.

If you have also borrowed from the failed bank or building society, any money you have saved with the bank or building society can be taken off the amount you are owe to reduce or clear this debt before receiving your compensation.

Guernsey

The first £50,000 per person or £100,000 for joint accounts per bank or building society brand are protected under the Guernsey Banking Deposit Compensation Scheme. If you have funds over this amount they must to deposited with a bank or building society that has a separate licence to ensure all your money is protected.

if you have also borrowed from the failed bank or building society any money you have saved with the bank or building society can be taken off the amount you are owe to reduce or clear this debt before receiving your compensation.  

Isle of Man

Through the Isle of Man’s Depositors’ Compensation Scheme (DCS) up to £50,000 per individual depositor for each bank or building society licence is protected. Those with a joint account will have £100,000 protected per brank or building society licence under the scheme.

If you have funds over this amount they should be deposited with a bank or building society that has a separate licence to ensure all your money is protected.

If you have borrowed from the bank or building society, your savings will not be used to reduce or repay your debt. Separate arrangements will be made for this.

Jersey

Individual depositors have up to £50,000 of their money protected per bank or building society licence under the Jersey Depositors Protection Scheme. Those with a joint account will have £100,000 of their money protected per bank or building society brand. If an individual depositor has over £50,000, the additional amount should be with a bank or building society that has a seperate licence in order for all their money to be protected.

If you have borrowed from the bank or building society, your savings will not be used to reduce or repay your debt. Separate arrangements will be made for this.

It's not who owns your bank, but the banking licence that's most important

Compensation limits are not payable for each savings account you have with a particular bank, but for the total amount you hold with them. It doesn't matter who your bank is owned by, but rather whether the banking licence is shared with other brands in the same group that will affect your compensation entitlement.

For example, in the UK, Halifax and Bank of Scotland are under the same banking licence, so you'll only be covered for £85,000 across the two brands under the terms of the Financial Services Compensation Scheme (or £150,000 for joint accounts). But NatWest and Royal Bank of Scotland, although both owned by RBS, have separate banking licences, so you would be covered by up to £85,000 for each bank.

 

UK Banking - who owns whom?

Our who owns whom page reveals which brands operate under which banking licence, helping savers work out to what degree their savings are protected by the FSCS.

 

FSCS protection on savings platforms

Things can get a little trickier if your savings are held in a savings platform.

Savings platforms – such as Raisin UK or Flagstone – are websites that offer savings accounts from selected banks and building societies, in some cases offering exclusive deals that you won’t be able to find anywhere else. They can offer some of the best rates, too, which is why you’ll regularly spot them in our charts.

One benefit of savings platforms is that you’re not tied to a single bank or building society, and can instead choose between several different providers in one place and easily move your money between them. However, the downside is that your FSCS protection isn’t so clear-cut.  

This is because the savings platform itself is only regulated as a payment firm, not a bank – it’s merely a kind of concierge service to help you find the best rates. This means that if it were to fail and it held your money outside of a protected account, you would not get your money back.

However, that isn’t the whole story. Each of the platforms has its own bank account where it keeps your money pending investment in your chosen bank or building society. If your money is in this hub or holding account which is provided by a regulated bank you will still have FSCS protection. You are always protected when your money is held in your chosen account.

This is why it’s essential to know who’s looking after your cash, and whether the necessary protections are in place. Here’s a quick overview of some of the most popular savings platforms and their hub account providers – and as you can see, all the most common ones are FSCS-protected.

PLATFORM

HOLDING ACCOUNT PROVIDER

FSCS PROTECTED?

Raisin UK

Starling Bank

Yes

Flagstone

Barclays Bank or HSBC

Yes

Hargreaves Lansdown Active Savings

Barclays Bank

Yes

Aviva Save

Starling Bank

Yes

Interactive Investor Cash Savings (provided by Flagstone)

Barclays Bank or HSBC

Yes

Insignis Cash Solutions

Barclays Bank

Yes

The account must be in your name to have suitable protection, and bear in mind overall FSCS limits too. The same £85,000 limit applies whether you’ve gone directly or through a platform, so if you’ve got £50,000 with Paragon Bank and another £50,000 held with Paragon but via a platform, you wouldn’t get the full £100,000 if it were to go bust, only the £85,000 maximum.

Similarly, if you’ve got savings with the hub account provider as well as through a savings platform, make sure that your savings don’t exceed the limit (unless you’re confident that your money won’t be kept in the hub account for long). Most platforms stipulate that any accounts offered by banks based in other European countries are protected by the equivalent guarantee scheme

Just bear in mind that, if things were to go wrong, timelines can be different. If you hold funds directly with a bank that fails, the FSCS should reimburse you within seven days. However, if it’s via a platform, it can take as long as three months to get your money back.

What about non-UK and EU banks?

Banks based outside the UK that offer savings accounts in the UK can now only do so through a UK subsidiary directly authorised by the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA). Being directly authorised in the UK also means that they come fully under the UK Financial Services Compensation Scheme which, as far as savers are concerned, means that they are the same as any other UK bank.

Now that the Brexit transition period is over, this applies to EU banks as well as those from further afield. However if you have already got savings with an EU bank that has chosen not to continue to operate in the UK, the money will still be covered by the scheme of the country where the bank is based, up to €100,000.

Are there any exceptions to these limits?

With UK Financial Services Compensation Scheme there is an exception for temporary high balances. Examples might include funds received temporarily due to a dramatic life event, such as:

  • Buying or selling a new property
  • Equity release funds from your main residence
  • Funds from an insurance policy
  • Compensation from a personal injury claim or death
  • State benefits for disability
  • Compensation received for unfair dismissal or wrongful conviction
  • Voluntary or compulsory redundancy
  • Marriage, civil partnership, divorce or dissolution of civil partnership
  • Retirement benefits received at retirement
  • Benefits paid on death
  • Inheritance
  • Monies received from a deceased’s estate held by a personal representative

Temporary high balances are covered for 12 months from the date the money is deposited into the account.  The 12-month period is available up to the 1 February 2021, after this the period of cover reduces to 6 months.  This should give enough time to redistribute the funds across banks to protect the full amount.

Other savings that are not covered by the protection scheme include any funds that are relevant to a conviction for money laundering, or where the account holder's identity has not been verified by the bank or building society under the money laundering regulations.

Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

At a glance

  • All banks and building societies listed by Moneyfacts are covered by a depositor protection scheme that would cover your money in the event the institution in question went bust.
  • This applies to offshore banks as well as UK-based entities.
  • Most UK savers will be covered under the UK scheme (the Financial Services Compensation Scheme), which covers up to £85,000 per person per banking licence.

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