Having money in your bank deposit account is safe…or is it?
All UK financial institutions with a banking licence are covered by the Financial Services Compensation Scheme (FSCS), which is designed to protect your deposit if the bank were to become insolvent.
The limit is £85,000 per person. So for a joint account cover of £170,000 is available.
If you have more than these amounts in a bank or building society deposit account do make sure you spread it around amongst other banking licence institutions to protect yourself.
However, one thing to be aware of is that this limit is per banking institution- not per individual bank.
As an example, recently the Co-op bank has been in the news since Moody’s downgraded its credit status to “junk bond” status.
Within the same banking institution as the Co-op bank is Britannia Building Society and Smile Bank. Therefore, if you held a deposit account in your own name only with all 3 institutions with £40,000 in each of them you would infact not be properly covered if the bank were to fail.
In total your deposits amount to £120,000 but since all 3 institutions are under the same banking licence, in a worst case scenario only £85,000 of this amount would be covered.
Do make sure you check your deposit accounts and ensure you spread your balance around accordingly.
I recently spoke to a prospective client who had £400,000 in one building society in a joint account with her husband.
She was particularly cautious and wanted to leave that money in a deposit account rather than to invest on the stock market. My advice to her was to move it as soon as possible and spread it around at least 5 building societies- even if some of them were not providing as attractive a rate as she was receiving on her current deposit.
At this level a small difference in interest rate is immaterial. What’s of greater priority is to ensure that in a worst case scenario the capital itself is covered.
If you have any queries on where your money is deposited and you are concerned about the cover under the FSCS please do call me on 01932 698150.