This new campaign comes as the FSCS beefs up the protection available to savers. From the January 1 this year, the FSCS will guarantee the first £85,000 saved in a deposit account, should a bank or building society goes bust. This is a significant rise on the £50,000 that was previously protected.
This is a “per person” limit, so those with joint accounts can effectively protect up to £170,000 between them.
New faster payout rules have also come into force which should mean that the majority of claims get paid with a week – and the rest within just 20 days.
However, savers should be aware that this limit only applies per banking institution, not per brand. So those with money saved with First Direct and HSBC will only have a maximum of £85,000 protection, as these are the same bank.
Despite the recent financial crisis – which has seen a number of high-profile banks collapse – research indicates that less than half the population (47pc) were aware of the existence of a compensation scheme, and only 3pc could name the FSCS unprompted. The research also showed that there was a linked between awareness of the FSCS and higher levels of consumer confidence.
Mark Neale, the chief executive of the FSCS said: “The FSCS provides a vital function in helping build consumer confidence which contributes to financial stability. We’re launching this campaign to make sure consumers know the FSCS and the protection it provides should an authorised financial services firm go bust. We want consumers to check how FSCS protection applies to their own individual circumstances and be reassured their money is safe.”
Martin Lewis of Moneysavingexpert.com added: “The financial services industry doesn’t have the best reputation right now, but put your money in a fully UK regulated savings account and the first £85,000 will be protected with a government-backed guarantee. Put the cash under the mattress and even the best home insurance policies will only cover a £1,000 if it was stolen or disappeared in a fire.”
But he said there are anomalies in the system, particularly in relation to which bank owns which brand, and also what protection applies to foreign-owned banks operating in the UK. “So it is good to see the FSCS launching a campaign to help explain this.”
The changes to the level of compensation provided by the FSCS, bring the UK in line with a new European rules on compensation. Banks in the European Economic Area (which is basically the EU plus Norway, Iceland and Liechtenstein) now protect up to €100,000 – equivalent to about £85,000.
Bank from outside this area – such as the Bank of Baroda or ICICI Bank (both based in India) have to be fully authorised by the Financial Services Authority to offer savings account in the UK, which means savers will be fully protected under the FSCS.
However, the amount the FSCS will paid out following the collapse of an investment companies remains at just £50,000. There is no upper limit on the amount paid if an insurance company goes out of business, leaving customers out of pocket, but the FSCS will only pay 90pc on any subsequent claim.
