Gift cards and peer to peer lending are among the financial products that millions of people incorrectly believe are covered by the Financial Services Compensation Scheme (FSCS), according to new research.
The FSCS is the UK’s savings safety net which protects deposits held in UK-regulated banks, building societies and credit unions. If you hold money with any of these, your deposits are protected up to £85,000 per person, per financial organisation.
According to a recent survey, 76% of people are aware that deposit accounts – including current accounts, savings accounts and credit unions – are protected up to this limit.
However, millions of people incorrectly believe they will get their money back if the companies behind a variety of financial products go bust.
Gift cards are not protected
The recent spate of retailers entering administration has highlighted the importance of knowing your rights and protection when it comes to certain products, particularly gift cards.
If a company goes into administration the administrators get certain powers to help turn the company around. These powers enable them to refuse to accept vouchers if they consider this is in the best interests of the company. As gift cards are not protected by the FSCS, this may leave customers with worthless vouchers.
However, 18% of people incorrectly think that gift cards are covered by FSCS protection. 16% believe the same for mobile phone top-ups and 15% think that book tokens are protected.
For more information on what you can do with your gift vouchers if a company won’t accept them and how to avoid problems in the first place, visit our guide on your gift card rights if a company goes into administration.
Almost one in five people (19%) think that peer-to-peer lending schemes are protected, but this is not currently the case. However, if the peer-to-peer site holds the investor’s money in a client account opened with an FCA-authorised bank or building society, the FSCS will cover the investor up to £85,000 if the bank or building society goes bust.
Mark Neale, chief executive of FSCS, said: ‘FSCS protects customers of authorised firms which go out of business. Peer-to-peer lending schemes, gift cards, mobile phone top-ups or book tokens are not authorised products so people will not get their money back from FSCS if the companies behind them fail. Before taking out any product, people should check whether they are protected if the worst was to happen.’