Savings Accounts Protection

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Savings Accounts Protection

Banks and building societies operating in Britain are regulated by the Financial Services Authority (FSA), meaning they must obey strict rules when looking after their customers’ money.

Although any investment tied up with a FSA-regulated institution is safe, there is still the slightest chance that the bank or building society involved could suffer a collapse. However, if such an event were to occur then customers would still be protected (up to a set limit) on their funds by the Financial Services Compensation Scheme (FSCS)*.

The FSCS is activated once an authorised company goes out of business or the Financial Services Authority (FSA) feels that the business is not likely or unable to repay its customers. In such cases, most individuals are entitled to a maximum amount of financial compensation of 100% of the first £50,000.

This is the reason why customers looking to deposit a large amount of money are advised to divide it into smaller amounts to ensure they make the most of the guarantee.

With joint accounts, each individual is entitled to receive compensation up to the maximum limit in respect of his or her share of the deposit. The FSCS assumes the account is held equally between the holders and splits it 50:50 unless it is proven otherwise.

Additionally, if an authorised firm owns or is made up of a number of saving brands, all accounts held with this firm would be deemed as one (for the purpose of this compensation scheme only). As a result, the maximum limit would then apply to all the accounts combined, not individually.

* The FSCS was introduced in December 2001 as a replacement for a number of schemes that helped protect customers against companies that go out of business or into liquidation, such as the Deposit Protection scheme and the Building Societies Investor Protection Scheme.

Banking Code

Another source of protection is provided from the British Banker’s Association. Banks and building societies that abide by their banking code must offer a fair service and ensure their customers are fully aware of certain information and any updates to services.

Firms not based in the UK

Most financial services firms are required by law to get authorisation from the FSA before they can do business in the UK . The FSA’s register has information on all authorised firms currently doing business in the UK . The Register includes firms that are UK authorised as well as those authorised in another European Economic Area (EEA) state that also conduct business in the UK .

If you are considering or currently doing business with a firm authorised in another EEA state you should ask for further information from the firm or its UK branch about its complaints and compensation arrangements. This is because the position may differ compared to a UK authorised firm.

If you do business with a UK branch of a bank authorised in another member state the compensation arrangements will not be the same as FSA-authorised banks based in the UK .