From building up savings to keeping lump sums of money safe, there is an array of reasons why a person may opt to keep their money in the bank. Understandably, many will likely want to ensure that their cash is in safe hands.
Back in 2001, the Financial Services Compensation Scheme (FSCS) was founded.
Set-up by parliament and funded by the financial services industry, FSCS is an independent and free service designed to protect consumers when financial firms fail.
It means that if a person holds money with a UK-authorised bank, building society or credit union that fails after January 1, 2017, savers will be automatically compensated.
This is up to £85,000 per eligible person, per bank, building society or credit union.
For joint accounts, this is up to £170,000.
FSCS also protects certain qualifying temporary high balances up to £1million, and this is for up to six months from when the amount was first deposited.
The FSCS website explains that where a person holds their money could have an impact on the amount of compensation they’re entitled to.
“If you have money in multiple accounts with banks that are part of the same banking group (and share a banking licence) we have to treat them as one bank,” the website explains.
“This means that our compensation limit applies to the total amount you hold across all these accounts, not to each separate account.”
So, what does this mean for savers who may have savings in different accounts which share a banking licence?
Expanding on the details, an FSCS spokesperson told Express.co.uk “that if savers have money in multiple accounts with banks that are part of the same banking group, that is, share a Firm Reference Number (FRN), we have to treat these deposits as if they are held with one bank”.
“This means that our compensation limit applies to the total amount savers hold across all these accounts, not to each separate account.
“For joint accounts, the limit applies to each named account holder, so FSCS would protect up to £170,000 of savings.”
Some savers may want to look into whether their savings are fully protected under the scheme, and there may be a way to check.
“For our compensation limit to apply to each individual account, savers would need to hold money with banks with different FRN numbers,” the FSCS spokesperson said.
“Savers can search the financial services register – https://register.fca.org.uk – on the Financial Conduct Authority’s website to see which banks share an FRN number.”
Should savers find themselves eligible for compensation, then the FSCS website points out that savers don’t need to do anything.
Instead, FSCS will compensate them automatically.
The website also explains that FSCS aims to pay compensation within seven days of a bank or building society failing, however more complex cases will take longer.