How safe are your savings? by Tom Reed

Tom Reed, Financial Adviser at Coole Bevis Wealth Management Limited, looks at how you can ensure that your savings are protected by the Financial Services Compensation Scheme (FSCS).

With investments put away in savings accounts, investments and mortgages, you’d assume that there is some kind of protection in place. But exactly how safe are your savings in the event of an authorised financial services firm going bust? That’s exactly what happened during the 2008 banking crisis, and UK taxpayers had to pay out £4.5bn to the people who had saved their money with Icelandic bank, Icesave.

You’ll be happy to hear that there is a safeguard in place for such an occurrence that can make such drastic means unnecessary, depending on which banks are affected. The Financial Services Compensation Scheme (FSCS) was established to provide you with a level of protection. Up to £85,000 worth of cash savings are covered per individual, per financial institution, to be exact.

Jargon busting

What does it mean by ‘per financial institution‘? The FSCS only applies to funds that are saved within a financial institution with a banking authorisation. This means that it’s likely that not all of your bank accounts, or even all of your banks, are covered. If you have savings of £85,000 or more with two different banks who are owned by the same institution with just one authorisation, you’re only covered for a total of £85,000.

On the plus side, there is a measure in place to protect temporary high balances. Should you, for example, sell a house or receive inheritance, you will be covered for up to £1m for six months for some funds.

Actions you can take

If any of this raises concerns, there are things you can do to optimise your protection:

1. Find out which financial institution owns your bank: In recent years there has been mergers such as The Co-operative Bank and Britannia, amongst many others. You should regularly check which financial institution your money is held within. There are online tools available to help with this such as on the FSCS website (www.fscs.org.uk)
2. Stay within the limit: If you are with two banks under the same banking authorisation and your savings with those banks exceeds £85,000, it might be worth considering transferring the excess into an account with another bank.
3. Open a joint account: If you don’t want to spread your savings across banks, a joint account with your partner will essentially double your coverage as the FSCS covers you per individual.
4. Think twice about offshore banking: Although the higher rates of interest may be attractive, banks outside the UK may not be covered by the FSCS.

How can we help?

We work with the UK’s leading Asset Managers and Investment Institutions with one goal in mind; to create a risk-based plan designed to grow your wealth, but most importantly without exceeding the level of risk that you are prepared to accept.

Please email Tom  or call him on 01293 227670 if you would like to discuss options to maximise your savings and investments or visit our website to find out more about the range of services we can offer.