UK consumers are unclear about the compensation they are entitled to if a bank goes bust, a new Financial Services Compensation Scheme (FSCS) survey reveals. Half had ‘no idea’ what the current limit was and only 21% gave the correct figure of £85,000.
FSCS aims to raise awareness
One year after FSCS limits for individual savers were raised from £50,000 to £85,000, most bank customers remain uncertain of what they would get in the event of a Northern Rock style collapse. This is despite a £4m television publicity campaign.
Reflecting on current protection levels, FSCS chief executive, Mark Neale, said: ‘The £85,000 limit is good news for every saver in the country, with 99% of accounts now covered. Although there have been no high profile failures over the last 12 months, it is important for financial stability that savers are aware of the protection that is available to them.
‘As only those financial institutions authorised by the Financial Services Authority (FSA) are covered by the FSCS guarantee, it is vital that customers check their financial products are safe and remain within the limit.’
Banks to display limits more clearly
Last year, it was announced that the FSA plans to make it obligatory for all banks, building societies and credit unions in the UK to prominently display how much compensation savers could claim in the event of an institution failing and where they would get their money from. This information will be shown in every branch and on all bank websites.
Continuing confusion over compensation rules
The current rules of the Financial Services Compensation Scheme are far from simple. Which? personal finance expert, Ian Robinson, says: ‘It’s disappointing that public awareness remains low, but hardly surprising that people are confused. Not all bank brands are individually licensed, and those which share a licence, such as First Direct and HSBC or the Co-operative Bank and Smile, potentially reduce customers’ cover.
‘Others, such as RBS and NatWest have separate licences, despite being part of the same group. Which? would like to see full FSCS cover for each separate brand and a requirement that all products should have a label clearly displaying the extent of FSCS cover applicable.’