Saving Grace: How much compensation are you entitled to if a bank fails?

Saving Grace: How much compensation are you entitled to if a bank fails?
Date of Publication: Wednesday, 25 January 2012 16:00

Any ideas? Don't worry if not. You're in the majority.

UK savers are protected for up to £85,000 per person per financial institution.


Despite a multi-million-pound television advertising campaign designed to raise awareness, only 3% of people were aware of the measures by the end of last year, according to the Financial Services Compensation Scheme (FSCS).



New regulations imposed by the Financial Services Authority will soon force banks to display their affiliation with the FSCS both in-branch and online.


The hope is, of course, after numerous banking scandals of one shape or another, to restore some measure of confidence in banking.


Savings and Compensation: A Right Royal Mess

But it gets more complicated than this, unfortunately. You're covered for £85,000 per institution, but what constitutes an 'institution' is not immediately straightforward.


Yorkshire, Barnsley, Chelsea, and Norwich & Peterborough Building Societies, together with Egg, all converge under the roof of a single 'institution'.


Lloyds and HBOS merged in 2009. But Lloyds has a separate registration, which it shares with Cheltenham & Gloucester.


Halifax and the Bank of Scotland, meanwhile, share their registration with Birmingham Midshires, Intelligent Finance, Saga, and the AA.


Your £85,000 protection covers all deposits across all organisations that comprise one institution rather than each one individually. So, all accounts held with HBOS, Birmingham Midshires, Intelligent Finance, and so forth are protected to the tune of £85,000 collectively.


It takes a concerted effort to understand this vitally important issue.


The bottom line is: it's important, if you're dealing with large sums, to avoid depositing more than £85,000 in any one single institution, and to check which banking organisations are grouped together so that you can avoid inadvertently exposing yourself to potential losses should banks fail.


Hard to Keep Up

It's a real source of frustration from an editorial perspective, too. We've been revamping the main credit card and savings account pages here at Which4U over recent weeks. Identifying the financial bodies grouped together as single institutions to update our tables was astonishingly difficult.


Which4U Credit Cards

Which4U Savings Accounts


Sites are listing different information about the likes of Asda (part of the Santander group). And it's hardly reassuring that the Financial Services Authority's own attempt is, by its own admission, 'not a complete group structure'.


If unsure, it's always prudent to ask financial bodies about their collaborative registration before investing heavily in savings accounts or ISAs. Alternatively, there are exceptions where the level of protection is more comprehensive. All funds deposited with the state-backed NS&I are protected through its affiliation with the Treasury.


For only 3% to know about the compensation scheme and how it works is a systemic failure. At the end of the day, it's your money, and you're entitled to know how safe it is.


See the 'Savings Regulation: Compensation' section on Which4U's savings accounts page for more details.


Keith McDonald
Which4U Editor


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