Joint FSCS Protection

Reed_Richards

Suppose my wife and I have a joint account that contains £120,000 and I hold an account in my sole name with the same financial institution that contains £50,000. Let's assume that this £50,000 is in an ISA so there isn't the option to hold it jointly. The institution has FSCS protection but are we fully covered? Together we hold 2 x £85,000 = £170,000. But you could argue that my wife holds half the money in the joint account, £60,000 whilst I hold the other half, £60,000, + £50,000 = £110,000 and therefore I am not fully covered. So are we or are we not fully covered by FSCS protection? At this point it's a hypothetical situation, but for the future I would like to know.

Audaxer

In that situation your wife would be covered as she holds £60k - half the joint account. You would have £110k in your name so you wouldn't be fully covered.

ColdIron

But

I have my money in a joint account in a High Street bank. How would FSCS pay compensation if the bank failed?

• The compensation limit of £85,000* applies to each depositor for the total of their deposits with an organisation, regardless of how many accounts they hold. In the case of a joint account, the compensation limit is £170,000*.

https://www.fscs.org.uk/what-we-cover/questions-and-answers/qas-about-deposits/#question4

Keep_pedalling

Why would anyone be silly enough to hold that amount of saving in cash?

Reed_Richards

ColdIron, you quote what the FSCS says and it doesn't explicitly deal with the case of a mix of joint and sole accounts, which is why I am asking the question. If Audaxer is right then the maximum in the joint account to maintain full coverage for both my wife and myself would be £70,000, total only £120,000.

Some years ago I had an account with Icelandic bank "Icesave" and when it collapsed I was quickly compensated through the FSCS. So I know from personal experience that these issues are worth worrying about.

Reed_Richards

I've tracked down Martin's take on this issue here: https://www.moneysavingexpert.com/savings/safe-savings/#joint_protection . Although he does not give an example, he asserts that protection per person applies to half the money in a joint account so in line with what Audaxer says. I'm sure Martin knows his stuff but, frustratingly, I cannot find the same information on the FSCS web site.

HappyHarry

You each have £85,000 protection per bank.

A joint account is deemed a 50/50 split, unless evidence shows otherwise. (What evidence is undefined, however, a note between you and your wife is unlikely to be sufficient evidence).

So, your wife has £60,000 of the joint account protected.

You have £60,000 of the joint account protected, and another £25,000 of your sole account protected.

The remaining £25,000 in your sole account is not protected.

The best place to look for detail is in your own bank's FSCS communication. As an example, here is one from YBS:

https://www.ybs.co.uk/pdf/savings/fscs--factsheet.pdf

My money is in a joint account, how would the FSCS pay compensation if you failed?
The FSCS limit for deposits is £85,000 per person per authorised firm, in line with European Directives. Each depositor is covered up to the FSCS limit, regardless of how many accounts they hold or whether they are a single or joint account holder. In the case of a joint account, the FSCS will assume that the money in that account is split equally between the account holders, unless evidence shows otherwise.

This means that each account holder in a joint account would be eligible for compensation up to the maximum individual limit. For example, if a joint account has £170,000 invested in it, each account holder would receive £85,000 (assuming neither account holder had any other deposits with the same institution).

Reed_Richards

I have now been able to contact the FSCS and they have confirmed what HappyHarry and others say, a joint account is deemed to be split 50:50 so the FSCS protection for each individual applies to half the total sum held in a joint account. The short response I got from the FSCS did not mention any possible exceptions.

kidmugsy

Keep_pedalling wrote: »

Why would anyone be silly enough to hold that amount of saving in cash?

Because he understands how erratically equities perform? Because he thinks that CAPE, especially in the US, is rather high so that the return on equities for the next couple of decades might be rather low? Because he thinks bond yields are lousy and that even a whiff of higher inflation would drive their yields even lower? Because he plans to spend it fairly soon?