Are your savings safe when a bank goes bust?

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?