How safe are your savings?
There are two main elements to the security of your savings that is the risk of insolvency at the bank or building society where you keep your savings and whether you are eligible for protection with the Financial Services Compensation Scheme.
Insolvency | FSCS | Subsidiaries | International Banks | Structured products
Credit ratings and capital | Credit rating and capital example
If the bank or building society where you save is unable to repay you your money then it would be considered insolvent. For most conventional savings accounts you would be covered in this event by the Financial Services Compensation Scheme (FSCS).
The risk of a bank or building society becoming insolvent is sometimes referred to as ‘counterparty risk’.
The FSCS deposit protection scheme is designed to provide a guarantee to savers – up to a set limit – that they can get back their money if an authorised institution (bank or building society) is unable to meet its financial commitments.
You are covered up to £85,000 per authorised institution by the FSCS in the case of accounts with banks or building societies. (The same limit applies to accounts with credit unions).
You can check with the Financial Services Authority (FSA) to find out if an institution is authorised.
Trading names or subsidiaries of banking groups or building societies are not covered separately. For example, Birmingham Midshires is part of the Bank of Scotland so you would be covered in total up to £85,000 for any accounts you had with Bank of Scotland and any its subsidiaries (which also includes Halifax). Although Bank of Scotland is part of the Lloyds Banking Group, it is authorised as a standalone entity.
The key is to read the small print of any savings account you are considering or currently hold to see which authorised institution your money is held with, if you are concerned about exceeding your compensation limit with one institution.
Visit the FSCS website for more information about the FSCS.
Authorised financial firms in the European Economic Area (EEA) are listed by the FSA, and are likely to have comparable deposit protection cover but may be covered by different compensation arrangements.
If bank is outside of the EEA but its British-based business is authorised by the FSA deposits with that bank may be eligible for the FSCS.
See the tables below for examples of savings accounts currently available: