Savvy savers
Protecting your savings
From 7 October 2008, savings of up to £50,000 are guaranteed by the Financial Services Compensation Scheme (FSCS). But the protection applies per person, per institution (not account) that holds an individual banking licence.
All customers of authorised financial services firms in the UK are covered by the FSCS. It will pay compensation if a firm is unable, or likely to be unable, to pay claims against it – when this happens the firm falls into default. If a bank collapses and takes your savings with it, you will be able to claim compensation from the scheme.
Reclaiming savings
If you have savings with a bank or building society that becomes insolvent, you can reclaim up to 100 per cent of the first £50,000 you hold in each provider with its own banking licence. You should check which banks and building societies share a licence.
You do not need to contact the institution yourself in order to make a claim. You will typically be required to complete a claims application form, which the FSCS will send you after the provider defaults.
The FSCS aims to process all claims within six months after a declaration of default, although it may take longer depending on the complexity of the claim or whether or not there have been any delays with the liquidator.
The FSCS normally issues a cheque for compensation, but says it will consider other alternatives for claimants who do not have a bank or building society account.
When it comes to insurance, the FSCS will cover life insurance policies such as pensions, annuities and endowments, as well as motor, home and employers’ liability insurance. For these claims you will again have to fill in an application form from the FSCS (not from your insurer) in order for it to consider your claim.
If you are making a claim against an insurance company that has gone into liquidation, the FSCS could compensate you for the premiums you have already paid (if the insurer is unable to do so) and will try and help you transfer policies or pay you compensation.
Compensation is unlimited under the scheme, but you will not get all your money back unless it is a claim for a compulsory insurance, such as third-party motor cover. The scheme covers 100 per cent of the first £2,000 you have lost, plus 90 per cent of the remainder of the claim.
If you have specific questions or concerns about the details of your insurance policy rather than anything to do with compensation, you should speak directly to the insolvency practitioners who will be responsible for the administration of the insurer and the settlement of any claims.
If you are making a claim against an investment company that has gone into liquidation, you will have to supply the FSCS with specific details about your investment, such as its type, how much you invested and when. If your business with the company was only ever before August 1988, then the FSCS will not be able to help you.
The FSCS will usually ask you to send any documents relating to your investments which the company may have sent you.
For more information or to discuss anything in this article feel free to contact Doug McLean via email or phone.
