Banking for consumers Making your savings safer
The economic turmoil of the past few years has shown that banks are vulnerable to failure. The Financial Services Compensation Scheme (FSCS) offers a safety net to savers if your bank goes bust - but it does not offer enough protection for consumer savings.
We've been campaigning for reforms to the FSCS to make sure the scheme is easy to understand and gives consumers adequate protection.
What have we achieved so far?
We've been campaigning to reform the rules since 2008 and have seen some great results for savers so far.
The biggest change we campaigned for was the increase to the compensation limit the government will guarantee savers. Now, if your bank goes bust, you're covered for £85,000 per person, per firm. This is significantly more than the previous £50,000 limit.
We've also seen the Financial Services Authority take action to speed up the pay-out process, which will now see the majority of claims settled within seven days of a bank going into administration.
What do we still want to see?
We're pleased with the progress that's been made, but there are still a number of areas that need to be addressed.
- The compensation limit should apply to brands, not institutions. You could easily have accounts with two banks that seem completely different, but are in fact covered by the same license (for example HSBC and First Direct). Under the current system, if your savings are split between two banks that are owned by the same institution, you will only be compensated up to £85,000 in total. Given the number of different brands, it is extremely difficult for consumers to understand whether or not they are covered. We want changes made so that consumers who have spread their deposits sensibly are not caught out.
- Protection for temporary high balances. Many people will face situations during their lifetime where they hold temporary high balances in their bank accounts – for example, if they sell a house, receive a redundancy pay-out or an inheritance payment. We’re campaigning for changes that will provide cover for temporary high balances.
- Stronger compensation arrangements for foreign banks. The collapse of Icesave highlighted weaknesses in how consumers who save with foreign banks will be treated in the event of that bank failing. Which? is campaigning to ensure that there is a single point of contact for consumers to access the full amount of their compensation in their home country.
What’s coming soon?
The government has announced its intent to make sure that savers whose banks collapse get moved up the queue of who gets their money first. As a result of this ‘depositor preference’, consumers should be able to enjoy greater security for their savings. It has not yet been confirmed when depositor preference will be implemented.