/ Money

My savings scheme’s collapsed. Why isn’t my money protected?

Crying piggy bank

Why is it that many of the savings schemes used by people on lower incomes offer very little protection if something goes wrong? It’s time to get tighter on the rules governing savings products to help the poorest.

Many families on low incomes aren’t in the habit of regular saving.

Whether it’s due to mistrust of banks or exclusion from mainstream finance, many turn to convenient, local alternatives such as Christmas clubs. But in doing so, they sacrifice valuable savings protection.

If a UK bank fails, savings up to £85,000 are covered by the Financial Services Compensation Scheme (FSCS). When many banks got into difficulty during the 2008 financial crisis, the government even stepped in to vouchsafe savers’ money.

Learn lessons from Farepak collapse

And yet, back at home, the 116,000 savers with failed hamper company Farepak are still fighting to get their money back five years after the company’s collapse.

A liquidators’ report in October 2011 estimated that Farepak victims might eventually get about 15p in the pound. This unfairly penalises many of those who need the most encouragement to save.

It’s similar with supermarket savings stamps. If the retailer goes bust, you’re not covered under the FSCS and you’ll have to join the queue with other creditors, with little hope of getting back more than pennies.

If you buy gift cards or vouchers at a high street store, your protection is similarly weak. There needs to be more protection for unregulated savings schemes that fall outside of the FSCS’ remit.

Ring-fence savers’ money

Businesses like Farepak should have stronger obligations, which force them to ring-fence savers’ money from their own operations. In the meantime, I’d encourage consumers to ditch Christmas savings clubs in favour of their local credit union.

We’ve often struggled to create a savings culture in the UK that inspires confidence, and the plight of the Farepak victims risks even greater disengagement for those on low incomes. There has to be a better way of protecting people’s money.


To be honest I’ve never really seen the point of Savings Clubs – as if you have enough money to save it – It has always been safer in the Post Office or Bank and accrues some interest. The trouble is too many people will not ring fence that saving – it is then too easy to withdraw it before the time you are saving it for. whereas a Christmas Club will often not allow early withdrawal so the money is “safe” from withdrawal..

I’ve also never truly understood why people don’t plan a budget and keep to it (except for unexpected emergencies) – I can understand why people can’t do so, . I used to teach budgeting for our less able students until the National Curriculum stopped me doing so. In addition I do help those in financial difficulties as quite a few neighbours know I taught Maths and hope I can reduce the debt burden.in some way

The above article is a welcome contribution to the on-going campaign that for 5 years we have been fighting. So far 116,400 Savers are owed £37m, at least 207 people have died before receiving a single penny of their savings back and an Administration/Liquidation fee of £8.2M (which we pay).

The Farepak Victims Committee is campaigning to get regulations in place that protect those of us that PREPAY for goods or services. That can range from a gift voucher to a super market savings scheme – all unprotected. When Peacocks went into Administration, customers that had been given a voucher by family/friends were unable to spend them, even when the shops were open and like Farepak Victims have become UNSECURED CREDITORS. We believe this is wrong.

Over the last few months we have also discovered that HMRC are unsecured creditors – Prior to 2002 they were SECURED – The Enterprise Act 2002 change this. If a business goes into administration/liquidation then unpaid taxes that pay for our public services NHS, Education, Pensions are at the bottom of a pile and if lucky WE might get back 5-15p/£. We believe this is wrong.

To continue our fight for justice we’ve have established a Government E-Petition we would ask all that support us to sign our petition.