You’ve worked hard for your savings, so you’ll want to know they are safe in whichever bank or building society account you decide to put them in.
Ten years on from the start of the banking crisis, we look at what lessons have been learnt and what savers need to be aware of to ensure their precious savings are protected.
The Bank of England’s 2016 stress test was designed to see whether banks would be able to withstand another financial crisis.
Royal Bank of Scotland (RBS), which is majority owned by taxpayers, was the only bank to fail, although Barclays and Standard Chartered didn’t meet all the requirements and were told to build additional capital buffers to ensure they could withstand any future recession.
And this week’s news about Provident Financial Group, the parent company of Vanquis Bank will, I’m sure have made some savers very nervous.
Vanquis Bank has been quick to reassure savers that the business is ringfenced, is separately regulated by the PRA and FCA and has its own banking licence.
And therefore savers have full protection under the UK Financial Services Compensation Scheme, on balances of up to £85,000 per person.
On its website, Vanquis explains;
Provident Financial Group, the parent company of Vanquis Bank, has made an announcement regarding the performance of the company and mentioned a review by the Financial Conduct Authority (FCA) relating to Vanquis’s Repayment Option Plan (ROP).
Our customers are unaffected by today’s announcement and can continue to use their cards and make repayments as normal. The interest rate and terms of savings accounts remain unaffected and will not be changing.
With regard to ROP Vanquis has been working closely with the FCA on its ongoing review which is yet to reach a conclusion. If a customer has ROP on their account they will continue to benefit from all of its features.
ROP is a facility available to Vanquis credit card customers, so savings customers interest rates and terms remain unaffected.
We will of course keep you updated with any new information.
But what this does highlight is how important it is for savers to ensure their savings are protected by the Financial Services Compensation Scheme (FSCS). And if you are unsure, seek guidance and advice about whether your money is all protected.
If you have any further questions then please call one of our Savings Experts on 0800 011 9705.
The FSCS covers all UK-regulated current or savings accounts and cash ISAs in banks, building societies and credit unions up to £85,000, following an increase from £75,000 on the 30th January 2017.
‘This doesn’t mean you’ll get £85,000 protection for every account’
But a word of caution, this doesn't mean you'll get £85,000 protection for every account – under the current limit, savers are protected up to £85,000 per person, per banking licence.
‘Per banking licence’ is also key given that some providers share a banking licence, so savers could easily be unaware that their money is not fully protected.
For example, Halifax shares its banking licence with Birmingham Midshires, Bank of Scotland, Intelligent Finance, SAGA, AA (for accounts opened before September 1, 2015) and St James’s Place.
So, if you have more than £85,000 in these accounts combined, you would not be fully protected.
Additionally, it’s important to check before opening an account with a UK subsidiary of an overseas bank, whether your savings are protected by the compensation scheme in the country where the bank is based.
For example, RCI Bank is covered up to 100,000 euros under the French equivalent of the FSCS.
Protection above the FSCS limit
There are however, a few occasions when you might receive protection above the FSCS limit.
If you’ve had a life event such as a divorce settlement, inheritance or pay-out from a life insurance policy, ‘Temporary High Balance’ protection will cover deposits over £85,000 and up to £1m per banking licence for up to six months.
This protection is designed to give savers breathing space to plan what they wish to do with their lump sum.
After six months, you need to make sure you have no more than £85,000 with any bank or banks that share a licence, to ensure you are protected.
The savings market is notoriously difficult to navigate due to the large number of accounts available and the frequency in which interest rates on accounts change.
Manage your cash
At Savings Champion, we research and monitor the whole of the savings market to provide our clients with completely independent and unbiased savings advice.
For regular information about the best products on the savings market, sign up to our Best Buy Tables and Rate Alerts.
We can also advise on the appropriate action to take to spread funds over different providers to reduce risk and ensure full FSCS protection.
For clients that want the peace of mind that their savings are working as hard as possible and would like to have a savings professional monitoring their savings portfolio on their behalf, we have our Concierge Service.
> Call one of our Savings Experts on 0800 011 9705