Temporary High Balance Cover Across Different Banks

Mamaoon

Hello,

We are completing on our house sale and shall have more than the £85k usually covered by the FSCS in the event of a bank failing. The FSCS says you can get protection for up to £1million for up to 6 months for a number of particular life events such as a house sale.

I am wondering if that extra coverage has to be with 1 bank only or whether you can move your money around once you have received it into your current account and still get the higher protection across a couple of banks where you have more than the £85k usually covered. I have called up FSCS and 1 person told me it's fine to move it around and split the sale proceeds across banks to get the higher interest rates, e.g £200k in 1 bank, £100k in another as you get up to £1million coverage per bank. Another day, a different story though as FSCS have today told me you only get the higher protection in the 1st bank account your house sale money gets paid into and can't move it at all or the normal £85k coverage applies.

First world problems I know but I imagine there are a fair few people who need the cash available from a sale for a purchase.

Individual banks which I have spoken to only comment on their own bank's coverage understandably and I have nothing in writing from the FSCS and don't hold out hope of getting it.

Advice including who would be the authority on this if the FSCS isn't would be greatly appreciated thanks.

SpanishBlue

I was in a similar situation recently...


https://forums.moneysavingexpert.com/discussion/5778891/fscs-temporary-high-balance


You can move your money to different accounts as many times as you like, as long as you meet the criteria laid out on their website.


To put your mind at rest, do what I did and ask for email confirmation from FSCS.

eskbanker

I don't know the definitive answer about splitting it up but would suggest that the point is largely moot anyway - if your equity is below £250K it'll all fit into a Marcus @ 1.5% or if higher then you can put the extra amount in £85K chunks @ ~1.4% elsewhere, such as Virgin, Tesco, etc.

The Tesco limit is £1 million so if your six-figure sum is nearer seven figures than five then you could just put it all there....

Mamaoon

Hello Spanish Blue,

Your thread was the only thing I could find on the internet about it and I wondered how you got on with it. Good to hear that you did well by it. It's very disconcerting when different FSCS staff tell you such different things. I've asked for it in writing but am yet to receive, though it is early days.

Thanks for your reply!

SpanishBlue

After I phoned them, I contacted them via their message system on their website:-

https://www.fscs.org.uk/


Scroll down to "Contact form" and write exactly what you want them to confirm. Then ask them to confirm by email.

At least then you will have proof should you be unlucky enough to need to claim.

I got the confirmation from them just 4 hours after sending them a message.

SpanishBlue

Also, the FSCS have a Q&A section on Temporary High Balances.

https://www.fscs.org.uk/your-claim/questions-and-answers/qas-about-temporary-high-balances/

It's not as comprehensive as it could be, but it might reassure you on some points.

Mamaoon

I have now received this reply from the FSCS:

"Good Afternoon,

Thank you for your recent email.

To be covered by our Temporary High Balance protection for the six month period this would need to remain within the account it was first deposited into and cannot be split between a number of accounts.

Kind Regards

Customer Service Team
Financial Services Compensation Scheme
claims@fscs.org.uk"

which contradicts what you were advised SpanishBlue?!?!

xylophone

You could hold all the money safely in NS&I Income Bonds and not worry.

https://www.nsandi.com/income-bonds

SpanishBlue

I have emailed FSCS and asked them why they are now giving out different advice to what I was told.

For clarification, I have dug out my original message to FSCS and their reply which reads as follows...

Hello, I am about to sell my home (my only residence) which will give me for a few weeks, a balance over £85,000 in at least one account. I have read the Q & A section on your website regarding temporary high balances after a life event and have just spoken to your advisor Simon. For confirmation, please can you confirm that I am free to move to the funds of my house sale to one or more FSCS covered building society/bank accounts (to get a better interest rate) and that I will still be covered by your protection scheme in the unlikely event of having to claim on it. Thank you.

Good Afternoon,

Thank you for your email.

As long as the property is your main residence you are protected under the temporary high balance for up to £1 million for up to six months from the initial deposit.You are free to move the money to a different UK authorised account, however, the six months will not renew.

Kind regards

Customer service team

Financial Services Compensation Scheme

bowlhead99

Basically when you have the "proceeds of sale"' in your bank account, it's one of the standard allowable excuses for having a high balance, temporarily.

If you had £985k in an account because you were keeping to the £85k limit and suddenly received £900k from your property, FSCS will accommodate that and say OK, fine, it's the proceeds of your sale and that's why you haven't kept to the £85k limit. As I understand it, you may be able to move that £900k lump to another account, where it was not strictly "proceeds of a property sale" but instead "transfer from another of my accounts where it was proceeds of a property sale", and still get FSCS cover on the outsize balance. The argument being that you had received this big lump and had not yet had the time (6 months from original proceeds) to work out how and where to safely store it and establish multiple banking relationships at <£85k each.

The onus on you is to provide the evidence you qualify for the special treatment of temp cover, but in the situation outlined, you still have the direct audit trail to show you got £900k proceeds on account A and then moved it to account B for a better interest rate while planning how to safely store it. So you may get away with that.

The response received by SB was to that effect:

You are free to move the money to a different UK authorised account, however, the six months will not renew.

Note the response to SB said you can move your proceeds to a different account, and did not say you can feel free to put it in five accounts at £100-£200k+ and get "temporary high balance cover" on them all. Realistically if you're putting money in multiple accounts with say £100-£200k in them, after receiving the initial £900k from a property sale... It is pretty difficult to argue that you temporarily and accidentally went over the £85k limit in any of those accounts due to receiving a big unmanageable lump from your sale, and you need access to the temp high balance cover when the bank goes bust holding your £100k.

If you put £100k in an account (rather than £85k), and the bank goes bust, and the reason you have £100k in the account is because you chose to put £100k in it (and not because you just sold a house for £100k) it is going to be difficult or impossible to claim protection on anything over the first £85k.

Mamaoon got the response that it has to stay in the first bank account to qualify for temporary cover, and that contradicts what SpanishBlue got where the implication is you can still have that cover on all the money if you moved it to 'a different account' (as in, one different other place) instead.

But Mamaoon's reply went on to clarify that the temporary high value from proceeds couldn't be split between a number of other accounts and still get the cover. Their reply seems fair in that regard and doesn't contradict what SB was told (the reply to SB did not say it could be split and spread over multiple accounts and they'd all qualify).

In other words, if I have a high balance because I sold my house, fair enough: I've accidentally and temporarily got a big pile of money out of the ordinary. But if I deliberately go and create three high balances with three different institutions as a plan to maximise my interest, that's not the fault of the house sale, that's my choice to give those institutions £100k or £250k instead of only the standard covered £85k.

SpanishBlue

This is the reply I recently received when I emailed FSCS and asked them why they are now giving out different advice to what I was told earlier in the year......

Thanks for your e-mail.

I am so sorry about this conflicting information, I can confirm.

Your query provided relates to the Depositor Protection Rule 10.12 from the FCA Compensation rules. The rule is defined as:
“Where all or part of a temporary high balance is transferred to another DGS memberafter the start of the coverage period* referred to in 10.7, the FSCS must pay compensation if it considers that the transferred deposit is sufficiently linked to the temporary high balance. The coverage period in 10.7 shall be calculated by reference to the point at which the temporary high balance was credited to the first account”.

*The ‘coverage period’ provider for in rule 10.7 is 6 months.

Our Legal team at the FSCS have advised the following with regards to this rule, which will provide some guidance on your situation:
“The FSCS cannot advise whether particular sums or transactions would definitely be protected as a TBH or not, which we can only determine based on a legal analysis of all the facts in the event of an actual default.
If the depositor is still unsure, they should seek independent legal advice for their situation, but this would be at their own expense.”

I apologise that this may not provide an exact answer to your situation, but as you can see from the Legal note, it is extremely difficult for FSCS to provide a position on this matter until it actually occurs.

Kind regards

Customer service team

So it's not quite as clear as it originally appeared. Personally after reading the above, I would advise anyone with a life changing amount NOT to move over £85,000 of it to another bank or building society.