Do you use savings schemes to put money aside for special occasions? Do you prefer to give gift vouchers as gifts? If you do, be warned, you could be in murky waters should the company go bust.
You’ll probably remember the Christmas club business Farepak going bust in 2006. The story reappeared in the headlines last week when six years on, those who lost out found out they’d get half their money back.
The Farepak case has left many people wary of similar savings and hamper schemes. After a five-year wait, Farepak savers will have received back just half of what they put in. And there’s nothing to say a similar case couldn’t happen again.
Up to £85,000 protection
In recent years shoppers and savers have become more aware of the protection offered by the Financial Services Compensation Scheme. Up to £85,000 per person per licensed institution is covered.
But what is less well known is the wide array of financial products that offer little or no protection if a company goes bust. Retailer vouchers and gift cards aren’t covered, nor are most Christmas clubs and retailer savings stamp schemes.
The lack of protection extends to retailer loyalty point schemes too. It’s highly unlikely that giants like Sainsbury’s or Tesco are going to go bust, but it’s worth bearing in mind, particularly with smaller retailers.
Wine and stamp investments
There are plenty of other products that may not come with the full consumer protection you expect. Foreign currency exchange, property investment clubs, land-banking schemes, alternative investments like wine or stamps, peer-to-peer lending, carbon credits, the list goes on…
Many of us will be saving up now to avoid having to put Christmas on our credit cards. Putting a regular amount aside is a sensible move and one best done via an instant-access savings account. You can then relax in the knowledge your money is protected.
Have you been left empty-handed by the collapse of an unregulated scheme such as a Christmas scheme, or lost out on vouchers due to a company going bust?
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