Is my money safe in the bank?

Thanks to the Financial Services Compensation Scheme (FSCS), a statutory scheme in the UK that protects customers of authorised financial institutions, up to £85,000 of your money is protected per person, per banking group – provided that the financial institution is regulated by the Financial Conduct Authority, the Prudential Regulation Authority, or both.

Is my money safe in the bank?

Are banks safe?

Following the financial crisis of 2008, the £500 billion government bailout that followed and now the economic impact of the coronavirus crisis, people are more concerned than ever before about where to put their savings. 

While the Bank of England anticipates that the UK economy will be back to its pre-pandemic size by the end of 2021, as a savvy saver, you’ll probably want to educate yourself on whether your money is safe in the bank, how FSCS protection works, and what could happen if things go wrong.

Is my money safeIs my money safeIs my money safe

What is the FSCS?

The FSCS stands for the Financial Services Compensation Scheme, and it’s designed to compensate you in the event of your financial institution failing. It covers a range of financial products, including deposits, pensions, investments, bank accounts, mortgages and insurance. 

It can also compensate you if your financial institution has given you misleading advice and has since closed down. The FSCS is a free, independent service set up by the UK government.  

It’s important to note that the FSCS doesn’t cover some financial products, and they may limit the amount of compensation you can receive.

What counts as a financial institution? 

A financial institution is a company that focuses on dealing, selling and providing financial products such as investments, current and savings accounts, loans and deposits. To be covered under the FSCS, the institution must be authorised and regulated by the Financial Conduct Authority (FCA), the Prudential Regulation Authority, or both.

Which banks are protected by the FSCS? 

In the UK, most banks and building societies operate in accordance with FCA regulations. These are the most popular banks covered by the FSCS, listed in their banking groups:

  • Bank of Cyprus UK
  • Bank of Ireland UK, Post Office, AA (for accounts opened after 2 September 2015)
  • Bank of Scotland, Aviva, Halifax, Intelligent Finance, Birmingham Midshires (BM Savings), AA (for accounts opened before 2 September 2015), Saga, Capital Bank, St James’s Place Bank
  • Barclays, Standard Life Cash Savings, The Woolwich
  • Citibank
  • Clydesdale Bank, Yorkshire Bank, Virgin Money
  • The Co-operative Bank, Smile, Britannia
  • Coventry Building Society, Stroud & Swindon
  • HSBC, First Direct
  • Lloyds Bank, Lloyds Bank Private Banking
  • Nationwide, Cheshire Building Society, Derbyshire Building Society, Dunfermline Building Society
  • NatWest
  • Royal Bank of Scotland
  • Sainsbury’s Bank
  • Santander (previously Abbey), Cahoot
  • Skipton Building Society, Scarborough Investments Direct
  • Tesco Personal Finance PLC
  • TSB
  • Yorkshire Building Society, Barnsley Building Society, Chelsea Building Society, Norwich & Peterborough Building Society

Which banks are linked?

It’s common for one financial institution to own multiple banks in what’s known as a banking group, meaning that the banks within a group are linked together, as is the case of Bank of Scotland, Aviva and Halifax, as noted in the list above.

To ensure that all your money is covered by the FSCS (because up to £85,000 of your money is covered per person, per banking group), you’ll need to know who exactly owns each institution you bank with. You can find this out by searching online for ‘who owns who in banking’.

Am I eligible for FSCS protection?

The rules for FSCS protection eligibility are set out by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA). The criteria are as follows:

  1. Your financial services firm must have failed and be unable to return your money
  2. The FCA or PRA must have been authorised the firm at the time you opened a financial product
  3. You must have lost money
  4. The money you are claiming for is your money. Although in some cases, businesses and charities can claim too

How does FSCS protection work for savings and bank accounts?

Under FSCS protection, up to £85,000 of your savings are covered with each institution, so it’s advisable to split it across accounts held with different banking groups if you have more than £85,000 in savings, as doing so will protect all of your savings. 

It’s important to check who owns the banks you want to save with, because if they are ‘different’ banks but are owned by the same organisation, you’ll still only be covered for £85,000 in total. 

For example, imagine you have £170,000 in savings. You split this in half and save £85,000 with Halifax, and the other £85,000 with the Bank of Scotland.

Because both of these banks are part of the same banking group – Bank of Scotland plc – should the banking group fail, your money would only be protected up to £85,000 and you would lose the other £85,000.  

One way you can tackle this is by having a joint account, which will be covered up to £170,000, or simply research who owns which bank to ensure you save your money with unrelated institutions. 

How much is covered by the FSCS?

Despite protecting a range of financial products, the FSCS only covers set amounts for certain financial products. Below is the maximum amount you can claim for, but keep in mind that you will only receive compensation for what you’ve actually lost and not the maximum amount stated (unless you actually lost the maximum amount or more):

  • Banks and building societies: £85,000 per person, per financial institution 
  • Credit unions: £85,000 per person, per firm 
  • Debt management: £85,000 per person, per firm, up from £50,000 
  • Home finance intermediation: £85,000 per person, per financial institution, up from £50,000 
  • General insurance: 90-100%, depending on the circumstances 
  • Life and pensions intermediation: £85,000 per person, per firm, up from £50,000  
  • Long-term care insurance: 100% with no upper limit (if the firm failed after 3 July 2015), up from £50,000 
  • Investment provision: £85,000 per person, per firm, up from £50,000 
  • Investment intermediation: £85,000 per person, per firm, up from £50,000 
  • Payment protection insurance: 90% of total claim (if the firm failed after 1 Jan 2010)

What if I have more than £85,000 in savings? 

As we mentioned above, if you have more than £85,000 in savings, it’s advisable to save it with separate institutions so the scheme covers all your money. 

What this means is that you’ll need to check who owns the banks you want to save with. If the same banking group owns all the banks holding your money, you’ll only be covered up to £85,000. Alternatively, you could open a joint account and receive cover for up to £170,000. 

Does the FSCS ever protect more than £85,000 for a single saver? 

The FSCS has a ‘special provision’, where savings of up to £1 million may be protected for a six month period if your bank or building society fails.

This ‘special provision’ covers certain life events such as selling your home, inheritances, redundancy and insurance or compensation payouts that could lead to you having a temporarily higher-than-typical savings balance.

This extra cover will only apply from the date on which the money is transferred into your account or the date which you become entitled to it – whichever comes last. If the worst does happen and you have to claim under this special provision, you’ll need to be able to prove where this money came from and be prepared to wait up to three months for any amount over £85,000. 

You can find out more about what qualifies as a ‘life event’ on the FSCS website.

What if I have multiple accounts with the same bank?

If you have multiple accounts with the same bank, your savings protection will be up to the maximum of £85,000 for the sum of your accounts at the same bank or building society because they are held by the same banking group. 

If you have money in accounts at multiple banks or building societies, the FSCS has a protection checker you can use to see what’s covered.

How does the FSCS protect joint savings?

If you have a joint savings account, you’ll be covered up to £170,000, which is £85,000 each when split evenly.

Does the FSCS cover mortgages, insurance and investments?

Yes, although the compensation limits are different to savings, and vary depending on the type of product you own. 

The current limits for each product area are as follows: 

  • Investments: 100% of the first £85,000 if the firm failed after 1 April 2019; £50,000 if before 
  • Mortgage advice and arranging: 100% of the first £85,000 if the firm failed after 1 April 2019; £50,000 if before
  • Long-term insurance (e.g. life assurance): 100% of the claim 
  • Compulsory general insurance (e.g. third-party car insurance): 100% of the claim Non-compulsory general insurance (e.g. home insurance): 90% of the claim 
  • General insurance advice and arranging: 90% of the claim
  • Advice for compulsory insurance is also protected up to 90% of the claim 

Unlike savings amounts, each product type is treated independently under FSCS rules. This means that if you choose to bank and invest with the same provider, you could be entitled to compensation for each of the products you hold, up to the relevant FSCS limit. For example, if you have £85,000 in savings and £50,000 in investments, you may be able to claim for both. 

While we’ve mentioned that the limit for investment compensation will be increased to £85,000, some other intermediation changes are also due to take place. 

For example, on 1 April 2019, investment intermediation, life and pensions intermediation and home finance intermediation all increased from £50,000 to £85,000.

What should I do if my bank collapses?

In the unlikely (but not impossible) event that your bank collapses, you should make a claim with the FSCS as soon as possible. 

To progress your claim, your banking institution will need to be authorised – so the first thing you should do is check that this is the case. You can do this directly on the FSCS website using their bank & savings protection checker.

How to make a claim with the FSCS

The process of claiming with the FSCS should only take up to two hours, but you’ll need to ensure you have the relevant documents required to complete your claim. Here’s how you can do that in a few simple steps: 

1. Get all your documents together

You might want to do this before you start, as it makes the process quicker and easier. You will need: 

  • Two forms of identification (e.g. passport and driving license)
  • Product and advice documents for the product or service you are claiming for 
  • Bank account details for the account you want any compensation to be transferred to 

2. Complete the claim checker

Before allowing you to make a claim, the FSCS requires you to enter a few basic details to check you can claim. 

3. Fill out the claim form

You’ll be asked a series of questions and required to scan in your supporting documents to submit your claim, before signing electronically to confirm everything is correct. 

4. Check on your claims progress

You’ll be sent an email to confirm everything has gone through, but it’s recommended that you keep a close eye on the progress of your claim and your email inbox in case any further information or supporting documents are required. 

We’ve also explored how long you can expect to wait to receive FSCS compensation below.

What happens if I have both debts and savings with a bank that fails?

If you have debts (e.g. a mortgage, loan or credit card) with a bank you also have savings with, your savings and your debt will be treated separately. 

You may be eligible to receive compensation for your savings from the FSCS, as explained above, but you’d still owe the bank the full amount of your debts.

However, if you have more than £85,000 in savings, anything over that is likely to be used to pay off any debts you have, or be deducted from the total debt amount by administrators.

Was the FSCS affected by Brexit?

No, FSCS protection continues as normal for those based in the UK using products or services provided by UK-authorised firms.

How can the FSCS afford to pay out compensation?

The FSCS isn’t sitting on a pile of money they might need in the event of a financial fallout. Instead, it operates a ‘compulsory levy’ on banks, insurers and others signed up to the scheme as and when it needs the money.

This ‘compulsory levy’ allows the FSCS to pull cash from more than just the affected sector. For example, if an insurer collapses, there is a chain of other institutions who must contribute, such as other insurers and banks. In theory, the FSCS has the legal power to call in funds from major financial institutions to cover the compensation needed should a financial institution fail, but there is a £4 billion cap on how much the FSCS can levy. 

If this weren’t enough, the Government would lend the money (i.e. taxpayers’ money), and then try to get it back from the insolvent bank’s assets and by putting a levy on the banks for years to pay it back, which happened during the 2008 crisis, with the Government only just selling the last of its shares in Lloyds in 2017.

How long does it take to receive FSCS compensation?

The time it takes for you to receive FSCS compensation depends on what kind of financial product you’re claiming compensation from.

  • Deposit failures: When your bank, building society or credit union fails, you may receive your money within seven days of making a claim, but the FSCS says these claims are usually paid in two or three days. 
  • Mortgages, investments and insurance cover: This compensation could take much longer to process and ultimately depends on the case’s complexity.  
  • Endowment claims, home finance and mortgage compensation: These typically take six months to come through. 

Straightforward insurance claims: Usually three months, but can often be longer.

Can I claim FSCS compensation for somebody who has died?

Yes – but you will need to provide additional documents as set out by the FSCS.

Is my money protected in an offshore savings account?

Money saved in an offshore account usually isn’t covered by the FSCS, meaning your money won’t be as protected. However, some offshore locations including Jersey, Guernsey, Gibraltar and the Isle of Man, now have their own financial compensation schemes, so some of your savings might be guaranteed if your provider goes under.

How to choose a bank that won’t fail

Ultimately, you can’t determine whether or not a bank will fail, and there’s no real way to determine the likelihood of this happening. What you can do, however, is mitigate your risk of losing savings by spreading them out across different authorised institutions.

How to save safely

The easiest way to save in safety is to stay under the £85,000 per person, per banking group limit and ensure you save with an authorised bank.

If you have more than £85,000 in savings, you might want to spread your money across different institutions owned by different companies to mitigate your risk. 

There are a few other ways you can save in safety, including the following: 

  • National Savings and Investments (NS&I). All money in the state-owned bank NS&I is fully Government-backed, meaning money deposited is as near to 100% safe as possible. The only way you would lose your money here is if the UK Government goes bankrupt or collapses, which is extremely unlikely.
  • Pay off your debts. Most credit cards and loans cost a lot more in interest than you earn on your savings, so by repaying any debt with your savings, you’ll be better off than before. For some useful tips on this, see our handy guide to paying off debt

Overpay your mortgage. Similar to paying off debt but with a tangible gain on the other side, reducing your mortgage costs is like earning cash as you’ll pay less interest in the long run. By paying off your mortgage, you could also enjoy better deals when it comes to remortgaging.

Is online banking covered by FSCS?

If you bank with a UK-authorised institution, online banking services are protected. The way you bank doesn’t make a difference. The important thing is that your bank is covered.

Find out more about the safety of online banking.

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