/ Money

Are your savings safe when a bank goes bust?

Banker asking for help

When we tested bank staff’s knowledge of the Financial Services Compensation Scheme (FSCS) not one of the call-handlers we spoke to told us about the scheme without being prompted…

The FSCS is designed to compensate you if a bank or building society goes bust, but our mystery shopping found staff are routinely giving wrong information about the scheme, meaning your savings may not be fully protected.

Our researchers posed as new customers with £100,000 to deposit into a savings account. This should have set alarm bells ringing, as the FSCS compensates losses up to £85,000 in the event of banking collapse – meaning £15,000 of our fictional saver’s cash wouldn’t have been covered.

Yet, despite making 156 calls (12 calls to each of the 13 main providers) not one call-handler warned of the £85,000 limit unprompted.

Once they were prompted, bank staff fared a little better. Yorkshire Building Society and Halifax correctly gave the £85,000 limit 12 times. HSBC came last, with only 8 correct answers out of 12. But, the point is, most of us wouldn’t have asked about the scheme in the first place – we shouldn’t have to either.

Joint accounts and Cash Isas

Joint accounts are protected up to £170,000 – twice that of a single account. When asked about the protection afforded joint accounts, Yorkshire BS came top of the class with full marks, while Britannia’s 11.5 out of 12 was a close second. The worst performers – NatWest and First Direct – only scored 6 out of 12.

Cash Isas are treated the same under the FSCS as savings or current accounts, however the limit is calculated per authorised provider, not per account. This means that if you have an Isa and a savings account with the same authorised provider, these will be protected only up to the £85,000 limit.

Banking licences

A trickier issue is the basis on which savings are protected.

The limits apply per banking licence, now known as Prudential Regulation Authority (PRA) authorisation, rather than per banking brand. So, if you have savings with more than one member of the same banking group, your cover may be limited. For example, if you have savings with The Co-operative Bank, Britannia and Smile, the total amount of protection available would still be £85,000 as these brands share the same authorisation.

This is something which can get a little confusing – and we would hope that bank staff would be able to explain it to us. Yet results on this part of our study were woeful – only one provider, First Direct, managed to score more than half marks on this question, while Santander scored zero.

This is why we’re calling for the FSCS to cover individual brands, which people recognise, rather than authorised provider. We would also like to see the FSCS protecting temporarily high balances, such as when a customer banks the proceeds of a house sale.

So what’s your experience of the FSCS? Have you ever tried to find out more about it from your bank?


I’m not sure that banks should be expected to warn prospective customers about the outcome if the bank goes bust. Although it is reasonable to expect banks to warn prospective customers about market risk (irrelevant in the case of simple deposits), it is unreasonable to expect banks to warn about credit risk, particularly as doing so could cause the customer to doubt the credit risk of the bank.

“This is why we’re calling for the FSCS to cover individual brands, which people recognise, rather than authorised provider.” Why not just make it a condition of the licence that companies operating under the same licence share the same name? Or is that too simple ?

I for one would be against a compensation scheme per individual brand as all that is likely to happen is the £85k gets watered down to something like £30k per brand. Which isn’t much

Unsurprisingly, I like my idea more 🙂

I believe that €100k is a minimum compensation amount across the EU, which has been implemented in the UK as £85k. Therefore £30k would be unlawfully insufficient.

Well that’s £85k per licence that I guess the government and therefore the tax payer ends up covering. So in the case of one licence covering 3 or 4 brands I can’t see anyone wanting to cover £255+ . I know many people won’t have that but why go down a route that isn’t likely to work, whilst re-branding brands under the same badge is effectively free to the tax payer.

If banks like the co-op can still make 2.5 billion loss then surely the banks aren’t out of the woods yet.

The savings account pages on websites of my banks spell out the FSCS limits and associated banks names. Looking at account statements from my two banks, both spell out the FSCS limit and also all the trading names for the banks, so you should be are aware of the protection they give.
The question of a large deposit is tricky – a house being a good example. My son has just sold his without yet buying another, so has a large cash holding. The chances of his solicitor’s bank going bust is a remote possibility of course, but once he had his money he split it into several deposit accounts, each below the limit remembering to leave space for a little interest. Easy online, not so easy if you are not. I don’t see how we should be asked to compensate “special cases” like this – it just needs some foresight on our part.
I wonder what lottery winners do? I doubt they can find enough accounts to deposit all their winnings.
I also wonder if those banks who offer better interest rates but are not covered by the FSCS scheme tell us when we want to make a deposit? Which? might have found that worth investigating.

I guess the argument I should have used is that if an individual brand goes “bust” that’s part of a larger group chances are it’s the group going bust as by now, many of the individual brands systems will have been merged into a group system. Taking all the recent IT failures, you start off with people noticing one brand having problem then within minutes 2, 3, 4 other brands are reported well its no surprise as they’ll all use the same IT system. And its not just IT systems that would have been merged.

All in all I think its easier to force all the brands to share the same name.

Would a pension pot be covered by the £85k limit? Cos if that’s the case £85k is not a lot and surely if the government want people to save maybe they should be a special case.

According to FSCS
“Long-term insurance (e.g. pensions and life assurance)
The maximum level of compensation for claims against firms declared in default on or after 1 January 2010 is 90% of the claim with no upper limit.”

If your pension pot is invested through say a SIPP in shares etc these are normally held in nominee accounts and are fully protected, I understand.

Thanks for that.

I don’t think it would be that difficult for the banks and building societies to print an infornation notice on the statements [and on-line versions if appropriate] as soon as the balance on an account gets close to the £85k FSCS full compenstaion limit.

The question of funds held in a bank account during and immediately after a property transaction, or any other significant asset disposal, is certainly worth attention. The financial climate now is quite worrying for a lot of people when multi-billion pound bank losses are being reported; we all criticise excessive bank profits but nobody wants to have their money in a loss-making bank so some shuffling of accounts is almost bound to occur and one or more institutions could become over-exposed. There is a technical difference between a huge current trading deficit and insolvency, but the niceties of the distinction are probably lost on most customers.

Savings accounts are generally regarded as relatively safe ways to save money, so it makes sense to tell customers if they wish to make a deposit above the FSCS limit. I wonder what percentage of customers who do make deposits of this amount of money are aware of the limit.

Lessismore says:
22 April 2014

It isn’t easy to open a new bank account now if you are over 90 and no longer have a current passport or driving licence. So it may not be as easy as you think to spread the risk. HSBC used to allow the Blue Mobility Badge as ID but apparently despite this being listed in their literature the new one is not acceptable.