Q&A: How new safety net for savings could benefit you

Published on Monday 6 October 2008 21:44

What protection do my savings have?

As of today, up to 50,000 is protected under the Financial Services Compensation Scheme (FSCS). This is up from 35,000.

Is that per person?

Yes – so if you have a joint account, you are protected for up to 100,000. And it is also per institution – if they are separate and have separate banking licences.

But I've got 60,000 – what about me?

The first 50,000 will be 100 per cent secure and you will be able to reclaim it in the same way as someone who holds less than the new limit. You may be able to recover some of your other money, but only after the bank has been liquidated. Yesterday, Alistair Darling, the Chancellor, said the FSA was looking at increasing the 50,000 limit even further.

How do I get my money back if my bank does fail?

If a bank or building society falls into difficulty, the FSCS will swing into action. It will get a list of customers from the administrators and if you are on it, you will be sent a form to apply for compensation.

How long will that take?

The FSCS says that so far it has settled 96 per cent of claims from depositors within two weeks, but these have related to credit union failures so there have been far fewer savers involved than if a major bank were to fail.

In a consultation document published earlier this year, the government proposed making it easier for the FSCS to settle claims so that all savers can be compensated within a week. No final decision has been made on these changes.

Does the increase from 35,000 to 50,000 affect many people, or only a handful?

If Treasury figures from last summer are unchanged, around 3.5million accounts which were not completely protected under the old limit are now 100 per cent guaranteed. There would still be a tiny number of people who will not have their deposits protected, but between them they hold almost 40 per cent of the money in UK savings accounts.