‘FSA confirms compensation levels increased to
October 10, 2008 at 11:47 am
If you have been tempted lately to withdraw your life savings and stick it all under the mattress, you can take comfort from the recent increase announced by the Financial Services Authority (FSA) to the limits under the Financial Services Compensation Scheme (FSCS).
Prior to Oct 7th this limit was £35,000, but it has now been raised to £50,000. Although this is welcome news for British savers, who may otherwise have been tempted to move their funds to Irish banks after the Irish Government announced a 100% guarantee for investors’ money, the scheme is not quite as straightforward as it may seem.
With both Bradford & Bingley and Alliance & Leicester now being owned by Santander, HBOS being acquired by Lloyds TSB, and Cheshire & Derbyshire Building Society being taken on by Nationwide, we can all be forgiven for not being 100% sure just who owns what. Those of us who have been conscientious in spreading our risk may well find that we now have too much with the one bank to benefit from the FSCS.
The significant words in the FSCS regulations are “authorised institutions”, and if a bank relies on its parent company’s authorisation then you could be in trouble. For instance if you have accounts with Halifax and Birmingham & Midshires, you would only be entitled to one payout of £50,000. This is because they are both owned by HBOS and therefore rely solely on its authorisation. If on the other hand you have accounts with Alliance & Leicester and the Abbey, you would be entitled to two payouts despite the fact that they both come under the Santander umbrella, since they have their own authorisations.
It’s undoubtedly a worrying time for savers but we should of course bear in mind that a major bank has never gone bust in the UK (well not since 1866) and that the mattress is really a much worse risk than a bank!
