Savings Accounts guides

Last updated: 23/07/2020 | Estimated Reading Time: 3 minutes

How safe are your savings? - the financial services compensation scheme

In recent times, the idea of major banks collapsing has gone from an unthinkable eventuality to a reality. The economic crash led to many people fearing for the security of their savings in a way that they had previously never expected to. As a result of this there are a growing number of individuals wondering what measures, if any, can be put in place to make sure that your money is secure in the case of another banking collapse.

In This Guide:

Financial services compensation scheme

One thing that should come as a comfort to those of us who have savings tucked away with a bank or building society, is that there is a government scheme in place that is designed to protect your savings in the event of a banking collapse. This scheme would provide you with compensation if the bank with which you had saved were to go under.

If you were to find yourself in this position, the protection afforded to you by the FSCS would return you your savings of up to £85,000. If you hold a joint account with the bank in question, this limit would be raised to £175,000. It is important to note that this limit includes any interest you have earned on the saved money. This scheme includes money that has been deposited in savings accounts, ISAs and current accounts, as long as the banks that they are held with are registered with the FSA (Financial Services Authority).

If a bank does go bust and you have money in an account with them, you are only covered for a maximum of £85,000 per bank. This means that if you have two accounts open with £85,000 in them, you will still only receive £85,000 in total as compensation. This also applies to different banks that are part of the same banking group, so if you had an account with Natwest and another with RBS, you would still only be able to get £85,000 back as compensation even if you had more than that split across the two accounts.

It is important to note that this compensation does not apply to investments. This means that if you had a stake in a company that collapsed or you had an investment that did not perform well and lost you money, you would not be able to claim compensation from the government.

Debts with a collapsed bank

If you have taken out credit with a bank or building society in the form of a mortgage, credit card debt or a personal loan, they will be treated as separate entities. This means that the amount you receive as compensation will be unaffected by your debts - it will purely be the amount of savings you had, up to £85,000. However you will still owe the debts that you initially had with the bank or building society.

If you are affected by a banking collapse and need to make a claim for compensation, the FSCS has aimed to process claims in between 7 to 20 days of the bank's collapse.