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'industry concerns surrounding the rising FSCS compensation levy ' & is £85k Bank Guarantee Realistic ?


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FCA reveals it has no plans to revisit FSCS funding

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Reading threads about banks in big trouble again , a common response from people with money in such banks are

"it's ok, i'm insured up to £85k"

How realistic is this ? My previous understanding it was a £5 billion fund (perhaps more these days ) that was managed by the very banks that may go bankrupt & I'm not clear where the £5 billion comes from, if its sitting on deposit or will be printed etc 

If a bank crisis happens that 5 billion will not go far , helping only  58,823.people with 85K each (£5 billion divided by £85k? ) 

could someone advise me on what to say to folks I know with money in the Monzo bank for example who may go down, should they remove their money now ?   

Monzo said the disruption resulting from Covid-19 has led to “significant doubt” about its ability to continue “as a going concern.”

https://www.housepricecrash.co.uk/forum/index.php?/topic/237062-monzo’s-losses-double-as-popular-uk-digital-bank-warns-of-pandemic-uncertainty/

Lloyds falls to a loss as it braces for mortgage defaults

https://www.housepricecrash.co.uk/forum/index.php?/topic/237060-lloyds-falls-to-a-loss-as-it-braces-for-mortgage-defaults/

 

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How the Financial Services Compensation Scheme protects your savings

https://www.moneysupermarket.com/savings/protecting-your-savings-guide/

 

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17 minutes ago, GodlessEndeavor said:

The answer of last resort is the same as the answer to everything else these days: "Money printer go brrr"

 

Like the PPF (Pension Protection Fund) which seems to be another "arm's length" government magic money tree which is on course to take over most defined benefit pensions funds in the UK, even the University employees believe that it covers them.

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5 hours ago, Saving For a Space Ship said:

"it's ok, i'm insured up to £85k"

How realistic is this ?

Ive often wondered this and never received a satisfactory answer when I’ve asked others how this will actually work when a crisis hits. 

Recently my BA flight was cancelled and all I heard before was that I am entitled to a cash refund within 7 days. Instead BA closed their phone lines and only offered vouchers online. I can’t help but think when the FSCS compensation is actually needed they will employ similar feet dragging exercises. 

I’ve since moved basically everything except daily expenses to NS&I

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8 minutes ago, sammersmith said:

I’ve since moved basically everything except daily expenses to NS&I

How safe is NS&I?

I've maxed out on premium bonds, and have a few tens of thousands in various Lloyds accounts. I thought to move this to NS&I but not sure exactly how secure even they'd be in a depression. 

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33 minutes ago, Orb said:

How safe is NS&I?

They’re not involved in loans or mortgages, and any failure stops with the government directly. 

35 minutes ago, Orb said:

I thought to move this to NS&I but not sure exactly how secure even they'd be in a depression. 

The only danger I see is if the government decides to withhold deposits, but i really can’t see them doing that.

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6 hours ago, msi said:

In case of a systemic failure, the Government steps in to cover the 85K - and will ****er the Banks in return

Yes. I think it's pretty clear that a Tory government will bail out the savers rather than lose their votes.

But that doesn't mean the post-bailout 85k will be worth anything like as much as it would be today. Or that savers won't have to wait months or years to get it.

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32 minutes ago, sammersmith said:

The only danger I see is if the government decides to withhold deposits, but i really can’t see them doing that.

I'm trying to understand precisely the difference between an NS&I deposit, and a deposit in a savings account with a commercial bank. I understand leveraging and fractional banking, and how both the saver and mortgagee have a simultaneous claim to deposits in commercial banks. But how does the government use money deposited with NS&I? Don't they lend it? And couldn't the borrowers default? If they did, how would that affect say Premium Bonds? 

I guess I'm trying to determine how much safer NS&I is compared with commercial banks. I'm genuinely concerned about my entire life's savings earnt through much blood and sweat disappearing into the void.

Edited by Orb
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That money does not exist. The fund is too small to cover the losses. 
The scheme is in place to prevent people going full bank run. That would kill everything. 
I mean, it’s a psychological trick to make you believe your money is safe. Money its safe until all clients go and ask for their money. 

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8 minutes ago, Orb said:

But how does the government use money deposited with NS&I? Don't they lend it? And couldn't the borrowers default?

As I understand it NS&I funding is used for government funding, so it isn’t lent as such and a default would mean a government default, which would seem unlikely no matter how bad things get. 

16 minutes ago, Orb said:

I guess I'm trying to determine how much safer NS&I is compared with commercial banks.

The government is directly responsible for anything that happens with NS&I. I gamble that they won’t risk the wrath of middle class savers.

24 minutes ago, Orb said:

I'm genuinely concerned about my entire life's savings earnt through much blood and sweat disappearing into the void.

Same. 

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12 minutes ago, sammersmith said:

As I understand it NS&I funding is used for government funding, so it isn’t lent as such and a default would mean a government default, which would seem unlikely no matter how bad things get. 

The government is directly responsible for anything that happens with NS&I. I gamble that they won’t risk the wrath of middle class savers.

Same. 

Thanks for your reply. I'm going to do some research on this. I'm not keen on gold, and feel more traditional financial assets are too much of a gamble for my liking. I'm not one to panic, I'm normally very stoic, but I'm beginning to feel the first wisps of real concern. I think a lot of people are, and I also think this might explain the counter intuitive housing market activity, and apparent recent small price rises in many areas. People are probably looking to park their money in property. The fear is becoming palpable. 

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it's all ********... just a confidence game... having said that in a systemic failure the government will step in - BUT will you get all of it back in both nominal AND real terms???

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14 hours ago, msi said:

FSCS is funded by a Levy.

In case of a systemic failure, the Government steps in to cover the 85K - and will ****er the Banks in return

 

 

2 hours ago, warpig said:

it's all ********... just a confidence game... having said that in a systemic failure the government will step in - BUT will you get all of it back in both nominal AND real terms???

Hahaa


Yes because the government has a big pot of money ready to payout ... 

Don't be so naive  ... the government will do jack sh1t. In fact. they're the ones more likely to steal and appropriate your money (see Greece and Cyprus)

I have pulled money from my NatWest account long ago. Anyone with money @ Natwest or Lloyds should consider doing the same! 

 

Edited by Warlord
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6 hours ago, Orb said:

I'm normally very stoic, but I'm beginning to feel the first wisps of real concern. I think a lot of people are, and I also think this might explain the counter intuitive housing market activity, and apparent recent small price rises in many areas. People are probably looking to park their money in property

The exact same thought has occurred to me. I have several hundred thousand pounds in British banks. And my wife also has substantial cash savings in the UK. 

We are now seriously considering buying a property just to potentially cover our arses. 

But let's take this thinking one step further.

If some of the banks collapse on a very large scale in the massive recession to come, how much will your property be valued at then ?

You might have saved 60% of your cash value sitting on Real Estate, but its better to keep 100%. 

There has to be a better way to preserve wealth than taking a leap and buying a massively over-valued tangible asset. 

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2 hours ago, Society of fools said:

The exact same thought has occurred to me. I have several hundred thousand pounds in British banks. And my wife also has substantial cash savings in the UK. 

We are now seriously considering buying a property just to potentially cover our arses. 

But let's take this thinking one step further.

If some of the banks collapse on a very large scale in the massive recession to come, how much will your property be valued at then ?

You might have saved 60% of your cash value sitting on Real Estate, but its better to keep 100%. 

There has to be a better way to preserve wealth than taking a leap and buying a massively over-valued tangible asset. 

Crypto ?

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Also you guys are apples and oranging the scheme costs. 

The levy exists as % of turnover for financial services firms yearly based on the payout. Its subdivided into different categorys of firms for example wealth advisors are different to retail banks. 

 

The costs have risen dramatically with all the cowboys post pension liberalisation where peoples small pots have been invested by dodgy advisors into get rich quick schemes, often with a kick back sorry marketing fee for the dodgy advisor.

When the scheme fails pensioners demand compensation for being wrongly advised to invest in Bulgarian developments rather than us bonds. 

The industry then pays out. Net impact is the decent honest ones are subsidising the behaviour of the cowboys and are having to increase their costs to cover it. They are pretty angry and it's unsustainable 

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19 hours ago, Saving For a Space Ship said:

could someone advise me on what to say to folks I know with money in the Monzo bank for example who may go down, should they remove their money now ?   

Yes.

How f’g stupid are you, holding money in Cash in an era of rising inflation?

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13 hours ago, Orb said:

How safe is NS&I?

I've maxed out on premium bonds, and have a few tens of thousands in various Lloyds accounts. I thought to move this to NS&I but not sure exactly how secure even they'd be in a depression. 

I’ve been telling clients to get out of Cash and NS&I.

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5 hours ago, Society of fools said:

The exact same thought has occurred to me. I have several hundred thousand pounds in British banks. And my wife also has substantial cash savings in the UK. 

We are now seriously considering buying a property just to potentially cover our arses. 

 

There has to be a better way to preserve wealth than taking a leap and buying a massively over-valued tangible asset. 

?????

As if we haven’t told you in the Gold thread and “I told you”.

Edited by Killer Bunny
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15 hours ago, Tiger131 said:

Like the PPF (Pension Protection Fund) which seems to be another "arm's length" government magic money tree which is on course to take over most defined benefit pensions funds in the UK, even the University employees believe that it covers them.

The PPF has the right to reduce pensions if it runs short of money. However right now it has a big surplus.

Also, it’s not on course to take over “most” schemes - only a tiny fraction are in it now, and most larger schemes are too well funded to qualify now.

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44 minutes ago, scottbeard said:

The PPF has the right to reduce pensions if it runs short of money. However right now it has a big surplus.

Also, it’s not on course to take over “most” schemes - only a tiny fraction are in it now, and most larger schemes are too well funded to qualify now.

Non taxpayer funded defined benefit schemes  are in big trouble as we enter an era of forever QE, negative bond yields, highly volatile stock market, the rapid decline of B&M business and of course the beer bug. The PPF still operates in the same investment marketplace as everyone else.

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  • 419 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
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