Q1: "I follow your items with great interest but being more than rather elderly am a bit of a coward when it comes to moving money from the High Street Bank where most of my savings are to another (unknown to me) smaller company.
You recently mentioned Raisin UK and Investec both of whom offer much better rates than Barclays. My question really is are these smaller providers as safe for my savings as one of the major banks, is there the usual protection etc.
Any help would be very much appreciated."
Q2: "You talk several times about "shared licenses" referring to the FSCS upper limit of £85,000 in any one establishment. My question is how can one find out which organisations share each license?"
Anna’s answer:
Many thanks for your questions – we receive many enquiries from savers who are concerned about the safety of their money in the event that their bank or building society ceases trading, but fortunately there is protection in place to give you some peace of mind.
The Financial Services Compensation Scheme (FSCS) covers deposits of up of £85,000 per person, per banking licence – so if you stick to the limit, you can rest assured that your funds are safe if the worst were to happen.
The good news is if, like a number of savers, you are concerned about using a lesser-known name, the same protection is in place whether you put your money with Barclays or with Investec, for example. And, of course, you are less likely to find the high street brands in the best buy tables, so you will almost certainly get a better return by choosing a provider that is less familiar to you.
Just because the smaller companies are less familiar, it doesn’t mean that you should be concerned about your funds being safe – they are governed by exactly the same rules and regulations, though it makes sense to stick to the FSCS limit if you are worried, just for peace of mind.
And don’t forget, these providers are paying better rates to encourage you to save with them, which hopefully also means that they are aiming to impress you with all aspects of their customer service and application processes.
Of course, there are times that you need to tread carefully, as the amount of cover is per person, not per account – so you need to make sure you’re not unwittingly falling foul of the rules.
Some providers share a banking licence, for example Bank of Scotland’s licence also covers Halifax, Saga and Birmingham Midshires, to name just a few. This means that the £85,000 limit applies to the amount held in total over all of those providers. So, if you have £50,000 with Halifax and £50,000 with Birmingham Midshires, £15,000 would not be protected.
It’s potentially a tricky minefield to navigate.
This is why we have produced a new guide covering the FSCS – which includes a list of all providers that share a banking licence, alongside other useful information.
We also have an FSCS tool available, which allows you to click on your provider and instantly tell whether it has its own banking licence or shares one and, if so, who with.
You also mention Raisin UK in your question, one of a number of ‘Savings Platforms’ which have become more prominent in the UK savings market recently. Raisin UK is not a savings provider itself. Instead it is a platform which allows you access to a range of savings accounts with a number of providers, such as ICICI Bank UK and Gatehouse Bank.
The FSCS protection applies to the accounts chosen, so you can deposit more than £85,000 via Raisin and, as long as the money is distributed to more than one provider in no more than £85,000 chunks per provider, you should be protected.
However, you must also take into account any savings that you already hold with these providers outside the platform – you should ensure that all funds held with each bank are less than the £85,000 limit, whether it is direct with the provider or via a platform, if you want all your cash protected.
It is perfectly understandable to be wary of putting your money with a provider that isn’t familiar to you – but rest assured that all banks and building societies that feature in our best buy tables are covered by the FSCS or a suitable European equivalent scheme (this is made clear in the information under each account).
By taking a leap of well-informed faith, you can move away from some of the low-paying accounts on the high street into an account that pays you a better return - after all, that extra interest on offer is far better off in your pocket!
If you need any further help with finding the accounts that are most suitable for your needs or have any questions about the FSCS or need more information on different providers, please call us on 0800 011 9705 to speak to one of our expert savings specialists.
You might also like...
@savingschampion
Find us on Facebook