Bank staff fail tests on compensation schemeWhich? research reveals poor knowledge of FSCS

19 April 2014

50 pound notes

Bank staff's knowledge of the Financial Services Compensation Scheme (FSCS) leaves a lot to be desired, according to Which? research.  

Our researchers were shocked to find some customers could be left significantly out of pocket if they followed the advice given by staff regarding this scheme. 

We spoke to employees at 13 of the biggest providers, posing as new customers with £100,000 to deposit into a savings account, and many admitted they were unsure about how the scheme worked.  

Though we made a total of 156 calls - 12 to each provider - not a single member of staff proactively told us about the scheme, or warned us that only £85,000 of our total would be protected in the event of a bank’s collapse.

Which? chief executive, Richard Lloyd said: 'It is inexcusable that bank staff can’t give customers basic information about the compensation scheme if their bank goes bust.

'In the event of a collapse, this bad advice could cost people many thousands of pounds from their life savings. We hope this is a wake-up call to the banks that they need to improve staff training.'

Go further: Savings protection – find out more about how your savings are protected

Bank staff unsure about FSCS compensation levels

Currently, your savings are protected up to a limit of £85,000 if your bank goes bust. Joint accounts receive double this limit - £170,000.

While no staff mentioned the limits unprompted, they did better once asked specifically about the scheme.

On single accounts, staff were usually able to identify the correct level of cover, though Yorkshire BS and Halifax were the only providers to correctly answer this question all 12 times. HSBC staff fared worst on this question, with only eight correct answers out of 12.

When questioned on the limit for joint accounts, Yorkshire BS scored full marks, while Britannia’s 11.5 out of 12 was a close second. The worst performers – NatWest and First Direct – only scored 6 out of 12.

Staff fail to mention that protection is per licence

The compensation limit applies per banking licence, now known as Prudential Regulation Authority (PRA) authorisation, rather than per banking brand.

So, for example, if you have savings with The Co-operative Bank, Britannia and Smile, the total amount of protection available would still be £85,000, as these brands share the same authorisation.

The vast majority of call-handlers did not explain this fact to our mystery shoppers when asked if savings elsewhere affected their protection. Only one provider, First Direct, managed to score more than half marks on this test, while Santander scored zero.

Which? believes that many consumers are confused about the structure of banking groups and has called for the FSCS to cover individual brands, which people recognise, rather than authorised provider.

Go further: Who owns who? – See our guide to who owns who in the savings market

Confusion surrounds protection of cash ISAs 

Savings accounts, cash Isas and current account deposits are all protected under the FSCS but, again, the limit is calculated per authorised provider, not per account. If you have an Isa and a savings account with the same authorised provider, these will only be protected up to the £85,000 limit.

When we asked staff whether cash Isas were treated the same under the FSCS as other savings products, the replies were much more reliable – seven scored full marks and three got 11 out of 12. Yet, some providers continued to make errors, with Barclays and HSBC scoring nine out of 12.

More on this...

  • Savings rate booster - find out what your savings account is currently paying
  • Best rate savings accounts - compare your current interest rate with the rest of the market
  • Keep your savings safe - 5 steps to keeping your savings safe