FSCS Protection Scheme

meggib

Hi all

Can anyone tell me what would happen if say you had 75K each in 2 x 5 year bonds with different banks/building societies and they then merged would you be covered by the protection scheme then for the full amount in the circumstances?

Just wondering.

Thanks

Mary

ColdIron

Depends if they share the same deposit-taking licence, even different banks can share a license, e,g, Bank of Scotland and Halifax

They are not trivial to obtain in the first place so after a merger they wouldn't casually discard one, so the real issue would be if they shared it at all

Have a look at this
http://www.which.co.uk/money/savings-and-investments/guides/fscs---protecting-your-money/who-owns-who-in-the-savings-market

alanq

As far as I am aware FSCS will not cover this.

What has happened in the cases that I know of is that savers have been given the option of withdrawing funds in excess of the FSCS guarantee from their fixed term account(s) without penalty.

I don't know that their is any obligation on financial institutions to permit this.

Ifts

This from the FSCS website:

Q: What happens if my bank or building society merge and my money is held in a product I can't withdraw from?

A: If you have accounts with banks/building societies which are part of one
larger group, the level of compensation you can claim will depend on whether the banks are separately authorised or just covered by the parent company's authorisation (as at the date of any merger). The limit of £75,000 applies per authorisation. Queries about what impact a merger will have on an individual's own situation, or about the term and conditions of particular products that you hold, you should be directed to the bank/building society.

http://www.fscs.org.uk/can-we-help/ ('Merger' in the search box)

According to MSE the government acted to protect savers after the financial crisis but this extra cover ended in December 2010:

What if my building society has merged with another?

In the aftermath of the financial crisis, a spate of building society takeovers peppered daily news broadcasts. Initially, the Government acted to protect savers who had money stashed in two different building societies that merged, but that ended in December 2010.

http://www.moneysavingexpert.com/savings/safe-savings

meggib

Thanks everyone for your replies.

I asked this question direct to FSCS and I asked direct to a bank I was going to tie money up for five years and was told definitely that if any 2 banks/building societies merged you would only be guaranteed up to the total of 75K guarantee.

And there would be no onus on them to let you withdraw your money.

How many people have money in multiple accounts to the limit thinking that their money is 100% safe? When in some circumstances it is not.

It has made me think anyway

Mary

PeacefulWaters

When the FSCS limit was reduced to £75k customers in fixed term accounts with balances higher than £75k were given the option to move their savings penalty free.

This might, therefore, occur in the circumstances you describe.

Reaper

I am going to speculate but I think it is an accurate assessment...

The government and FSCS aim to protect savers who do not accept risk (unlike investors) when they stand to lose money through no fault of their own. That's because they both need the public to have faith in the banking system. It would be catastrophic for the economy if that trust was lost, hence throwing away the rules and compensating savers during the last crisis.

IF 2 banks merged, and IF they did not allow you to withdraw penalty free and IF they then went bust I would fully expect the savers to be compensated in full regardless of the current rules.

However if you ignore the limit for a single institution and deliberately go over it I would not expect compensation to be given if there is a "next time" as the rules are now well known.