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Revealed – what banks really know about the FSCS

Which? tests banks on the compensation scheme

The FSCS can stop you losing out if a bank or other financial institution fails.

FSCS limits for deposits rose from £50,000 to £85,000 at the start of the year. Which? Money recently tested how well bank staff communicated this and checked their grasp of basic scheme rules. Some passed with flying colours but others revealed worrying gaps in their knowledge. 

Savings security

Which? Money researchers went undercover to check how good bank staff were at communicating details of the scheme to their customers and see how accurately they knew details of compensation limits and The Financial Services Compensation scheme (FSCS)  rules. 

The best performers were Bank of Scotland, Halifax and Britannia building society. LloydsTSB, Yorkshire building society, NatWest and Barclays also did well. RBS, HSBC and First Direct achieved lower scores, with only four out of ten RBS staff we quizzed giving the correct compensation limit for savers (£85,000). 

Although Santander staff achieved a good overall score (80% correct) one branch adviser assured our researcher that savings were covered ‘up to £1m’. One area where advisers struggled was joint accounts. The compensation limits for these is double that of individual accounts (£170,000) but many bank staff seemed unaware of this. 

At First Direct, only four out of ten gave the correct sum for joint accounts, while HSBC only managed five out of ten. 

Ownership issues    

A major problem with the FSCS is the way that cover is provided for institutions that are part of the same banking group. 

This remains oddly inconsistent. If the Co-operative Bank was to fold, for example, customers with Britannia or Smile accounts would also be affected, as they are all linked. The £85,000 limit covers accounts with all three. The same is true of HSBC and First Direct or Santander and Alliance & Leicester. 

While Halifax/Bank of Scotland is now part of the Lloyds Banking Group, it has a separate licence. If the parent group went out of business, customers would get up to £85,000 worth of cover for accounts held at Halifax and Bank of Scotland and a separate £85,000 cover for accounts held with LloydsTSB. 

The same applies to RBS and NatWest, which have long been part of the same group but retain separate status when it comes to compensation. More details on who owns who are provided on the Which? website. 

Too big to fail? 

Following the collapse of Icelandic banks and the run on Northern Rock, the government of the day ignored FSCS limits and compensated savers in full. More recent events, such as the failure of the Southsea Mortgage and Investment Company, where savers will only be compensated up to £85,000 regardless of the amount they had on deposit have be seen by many as marking a change of heart. 

Which? Money expert Ian Robinson said: ‘Savers should certainly check the FSCS limit and be careful if their holdings in a single institution are near this amount. By spreading their savings between different institutions they can be sure of gaining maximum protection.’

pound coins

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