In brief, FSCS is a scheme that can compensate some or all of your lost money if a financial institution defaults.

In more detail...

From the FSCS website:

FSCS is an independent body, set up under the Financial Services & Markets Act 2000 as the UK's compensation fund of last resort for customers of financial services firms.

This means that FSCS can pay compensation to consumers if an authorised financial services firm is unable, or likely to be unable, to pay claims against it.

Our service is free to consumers. Authorised firms are those regulated by the UK's financial watchdog, the Financial Services Authority (FSA) or previous financial regulators.

So... Whenever you plan to entrust your savings to an organisation, make sure they are regulated by the Financial Services Authority (FSA). Most financial institutions you've ever heard of almost certainly will be, along with many of the ones you haven't heard of, but it's important to check. An institution's website will often have a 'FAQ'/'Terms and Conditions'/'Legal' section (or similar) that can easily be searched for 'FSA'.

The amount of compensation (per institution) for savings is limited to (at the time of writing) £31,700, as follows:

- 100% of £2,000 plus 90% of £33,000.

This means that, any amount of money over £35,000 (£2,000 plus £33,000) in a single financial institution is not covered by the FSCS.

Even though many savers consider most well-known financial institutions to be very safe (and unlikely to default through, say, bankruptcy), if you have much more than £35,000 to save, it may be a good idea to spread it across multiple institutions (thereby spreading the risk, and also qualifying for more than one compensation claim should the need arise).

Be careful when spreading your money around: some apparently separate institutions are really the same one in disguise! For example, if you save £30,000 with HBOS and £30,000 with Sainsbury's Bank, you're really saving £60,000 with HBOS (as Sainsbury's Bank is a subsidiary of HBOS[1])... Again, check the institution's website for 'who they really are'.

FSCS website: http://www.fscs.org.uk/.
FSCS compensation limits page: http://www.fscs.org.uk/consumer/k...f_the_...nsation_Limits/.

Hopefully, this addresses all of the common questions that are asked about the FSCS.

[1]: See my reply below for more current info on Sainsbury's Bank.

Thanks for the link and information Ologhai. Do you happen to know if there a web site that shows how the various banks and/or building sites are inter-related?

I don't know of one (although, in all honesty, I've not looked!)

I think the only sure-fire way of finding out is to check the financial institution's website. As with finding out if a firm is regulated by the FSA, there's usually a 'FAQ'/'Terms and Conditions'/'Legal' section (or similar) with this information.

In the case of Sainsbury's Bank, for example, it's: http://www.sainsburysbank.co.uk/savings/in...latory_lr.shtml.

As an aside, I've just noticed on that page:

Sainsbury's Bank plc is a joint venture with 50% of the share capital owned by the Governor and Company of the Bank of Scotland, a subsidiary of HBOS plc.

I don't know if their situation has changed or whether I've simply mis-remembered, but I was sure I'd seen that they were a 'subsidiary of HBOS' on that page previously.

Thanks again. If truth be known, they're probably ALL inter-related. What a house-of-cards!

In answer to my own previous question regarding the availability of a web site which shows how the various banking institutions are linked, the following page (taken from the British Banker's Association web site) goes some way to explaining the relationships.

http://www.bba.org.uk/bba/jsp/polopoly.jsp?d=103&a=1562

Not a definitive index by any means, but a good starting point.

Hi

If the likes of HBOS start going bust, then everything is basically fooked. There's no way this scheme can pay out if the major players got t*ts up - there won't be enough money to do so (unless the government start the printing presses, but that's another matter). I think this scheme is more for investor reassurance and will help out with small firms going bust...

Just my humble opinion,
crude

It's not just your humble opinion -- it's the humble opinion of lots of people!

Having said that, HBOS/Sainsbury's was just used above as an example of the ways in which two apparently separate organisations are not actually separate after all.

People don't only entrust their savings to high-street banks, you know! Perhaps this is as good a place as any to mention Moody's Ratings!

If you don't know, 'Moody's Ratings' are a well-known score system given to financial institutions or investment vehicles as a measure of their likelihood to default.

When choosing where (or with whom) to invest, it may be a good idea to find out their Moody's Rating, and, hence, establish what level of risk is represented. Like with FSA/FSCS regulation, the FAQs or equivalent on an institution's website is a useful starting point when looking for Moody's Ratings.

Moody's Ratings on Wikipedia: http://en.wikipedia.org/wiki/Moody%27s.
More Moody's information including %age chance to default info: http://www.blaha.net/Finance%20Corporate%2...t%20Ratings.htm.

An institution such as ICICI, for example, is a pretty popular choice (presumably MSE's fairly long-standing endorsement of it hasn't done it any harm), but it doesn't necessarily do as well Moody's-wise as other places.

If universal armageddon happens, then I'm sure that FSCS and Moody's ratings will suddenly feel like trivialities, but on the off-chance armageddon doesn't come along, they may be worth consideration.

Whilst I commend you for posting this and the link to the FSCS, I feel the need to point out two things, and you'll forgive me for doing this large and in caps when you hear what I say:

1 . THE COMPENSATION LEVELS ARE THE MAXIMUM AMOUNTS YOU WILL GET.

Here's the quote from the FCSC :

"Compensation Limits
The maximum levels of compensation are: ... [etc]"

2 . THE FCSC WILL ONLY PAY OUT IF THE BANK HAS CEASED TRADING AND HAS INSUFFICIENT ASSETS TO SETTLE YOUR CLAIM

Here again is the quote:

"Where FSCS fits in
If you have a complaint or claim against a firm that is still trading, you should contact that firm directly. If your complaint is not resolved you can contact the Financial Ombudsman Service. If the firm has stopped trading and has insufficient assets to pay your claim, you can contact FSCS."


In summary :

1 . The FSCS guarantees to pay you ABSOLUTELY NOTHING
2 . The FSCS will not want to hear from you until the liquidators have found the bank to be absolutely worthless, which may take some time.


As crudefool says above, the FSCS simply will not have the funds to pay out in the event of a high street bank failing. You will be reliant on fellow savers causing a political stink large enough to inspire the politicians or BBA to act. Given the way they lety pensioners fry, I wouldn't count on politicians being too helpful unless they themselves have lost money. My suggestion? Bank with RBS or HBOS. Chances are good ol' Gordie has money with them [joke]. Now how safe do you feel?

You'll forgive me if I don't use large caps; I've always been wary of melodrama!



As I said in my original post: "The amount of compensation (per institution) for savings is limited to (at the time of writing) £31,700, as follows: 100% of £2,000 plus 90% of £33,000."

Should I have put the 'limited to' in large caps do you think?



I don't feel any different than I did before. You make it sound as if you've unearthed some long-hidden secret. It's possible that not everyone in the world is as stupid as you think!

People often seem to ask about the FSCS around here, so it seemed to make sense to have a post about it. As far as I can tell, I wasn't saying it was the be-all and end-all; I was just attempting to summarise what it's about for those who don't know the details (or know about it at all). It's really not worth shouting about!

The whole thing is just a game. As far as I can see, the idea is just to try to play in such a way as you believe increases your chances of an agreeable outcome. I don't see how splitting savings over £35k can do anything but decrease the risk (however slightly).

Shall we have this thread pinned?

Found it very useful and informative so I would say definitely - I don't visit this section very often so it would be good if it did'nt vanish and more people could add comments.

These schemes are designed to prevent runs on the banks. Just look at recent events in the credit markets and the panic that was being whipped up in the media!

Balls - only this morning I moved money from the Halifax to Sainsburys for this very reason to split up my savings between the Halifax and Sainsburys re the 35K limit.

I was reading on moneysavingexpert about the ICICI bank paying a good rate of interest but I googled the bank I found alot of bad posts about ICICI in the newsgroups... so decided to avoid them.

Who are the 'good' online e-savings accounts?

Sainsburys I assume, Nationwide, Alliance & Lecister, Halifax also I guess unless you already have money in Sainsburys? Who else? Any suggestions? What about people like the Yorkshire Building Society?

I am trying to avoid naming people like Northern Rock and Barclays, both of whom have had some bad PR re this subprime issue. There is a quote in Moneyweek last week - banks are like bridges, the seldom collapse but when they do they make a big splash!

It is easy to forget that when the Japanese economy went from being the World's darling - remember Thatcher telling us how we all had to learn Japanese, to bow correctly so not to insult Japanese businessmen and to learn their customs (bitch) - to the World's crock in a few short years that some of their major high street banks went bust also leaving millions of their savers in ruin.

People who were retired had to go back and look for work, others commited suicide. It was not so widely publicised over here for various reasons but mainly because that stupid Japanese honour code thing meant they did not want to lose face either from a corporate POV or an individual POV.

I remember seeing a news item about this and a Japanese couple who had retired would not even dare criticise their bank which had gone bust even though all their savings had disappeared and the elderly chap had to go looking for work again.

Remember, banks are like bridges...

I hate to tell you this, but I think HBOS hold the money for Sainsburys. Check out the FSA website or check out the small print of the Sainsbury's one. I'm pretty sure I'm right and if I am you have not put your eggs into different baskets. There's lots of info elsewhere about the FSC scheme which covers this topic.

Yep this scheme is a load of shit and will be replaced.