Are current accounts covered by Financial Services Compensation Scheme

Johnny4x4

Hi all,

It's a simple enough question but I can't find an unambiguous answer to this anywhere on Moneysaving Expert nor anywhere else for that matter. 

I even emailed the FSCA itself but they didn't even bother to reply. Maybe I'm missing something.

I want to know whether funds in my CURRENT ACCOUNT are covered by the £85,000 guarantee?

I've googled everything and I keep getting the same ambiguous statement that   'ELIGIBLE FUNDS' in a current account are covered.  They all use that terminology, 'eligible funds' including the FSCA, but there is never a definition of what 'eligible funds' is.    Now I remember in the past hearing about problems people had with money from the sale of big things (houses etc) which were not covered whilst the money was held in a current account during the transfer to secure investments.   So I'm assuming that 'Elligible Funds' means something like that (exceptional amounts in transfer are covered for a limited period - say one month)  and that ordinary balances MAY NOT be covered, otherwise they'd simply say 'Amounts in current accounts under the 85,000 ceiling are covered' wouldn't they?    Does anyone know for sure?    Hope one of you clever folk can help me, as this could be a trap for many.

Johnny

blue_max_3

This is their leaflet and it seems pretty clear.
https://www.fscs.org.uk/globalassets/badge-assets/shared/fscs_may2019_online-leaflet.pdf
FSCS protects your deposits, whether you’re an individual or a company. A deposit is money in accounts such as current and savings accounts, including cash ISAs. If your bank, building society or credit union fails, we may be able to pay compensation.
If it's a joint account, you would be entitled to double the protection.

dunstonh

It's a simple enough question but I can't find an unambiguous answer to this anywhere on Moneysaving Expert nor anywhere else for that matter. 

It is pretty clear on the FSCS website:

https://www.fscs.org.uk/what-we-cover/

If you hold money with a UK-authorised bank, building society or credit union that fails, we’ll automatically compensate you.

• up to £85,000 per eligible person, per bank, building society or credit union.

I even emailed the FSCA itself but they didn't even bother to reply. Maybe I'm missing something.

If that isn't a type then you probably emailed the wrong place.  If it is a typo then do remember that they are on lockdown and running a much reduced service.

They all use that terminology, 'eligible funds' including the FSCA, but there is never a definition of what 'eligible funds' is.

Not all money in a bank is protected.  If you exceed the limits or have multiple accounts that exceed the limits in total.  Or you exceed the special limit (temporary high balance) or if you have a business, the structure of that business is taken into account (e.g. ltd company gives you a second FSCS allowance but sole trader or partnership doesn't).

The use of the term "eligible" is just a way of highlighting that there are caveats.

The simple bottom line is that a current account is a deposit based product.

John_

Just to add to the comprehensive replies above, yes, it does.

Zanderman

Johnny4x4 said:

.......Does anyone know for sure?    Hope one of you clever folk can help me, as this could be a trap for many. 

Johnny

As others have said, yes, current accounts are obviously included.  There is no 'trap'.  Stop over-worrying.

Johnny4x4

Thank you Dunstonh for that very helpful reply.

'The use of the term "eligible" is just a way of highlighting that there are caveats.'

It's exactly those caveats that I was needing insight on.   It's the  FSCA's job to communicate unambiguously with savers and I like plain English with no caveats.  'Any personal money in a bank account of any kind under £85,000 per person is covered by the £85,000 guarantee'  What's wrong with that?

There's another ambiguity which the FSCA does not cover and which I've failed to get an answer to.   I think that most savers assume that if a financial crash occurs the government will pay them their <85,000 in a lump but I suspect that won't happen and that the government will pay in instalments. Say 20% the first year and 10% every subsequent year till done.  The FSCA does not mention how pay outs will occur, yet if savers knew that instalments would be likely they could build a safety-net into their financial arrangements.     It is all very well for people to say 'do not worry' but if these things are not explicitly covered the result could be as difficult as for those unfortunates who trusted in Equitable Life.

. "After a two-decade battle for justice, more than 160000 policyholders ... Last hope for victims of Equitable Life injustice as savers are asked to ... Policyholders will be told how the decision could affect their retirement fund"

I wonder what your opinion is of this?

Johnny

Zanderman

The Equitable Life situation was and is completely different to money held in banks.

bsms1147

The one time the FSCS had to step up for me and repay money owed due to a collapsed financial institution it was all paid in one go, though took a few months.

colsten

Johnny4x4 said:

  It's the  FSCA's job to communicate unambiguously with savers and I like plain English with no caveats. 

Who is/are the FSCA?

ChesterDog

Johnny4x4 said:

It's the  FSCA's job to communicate unambiguously with savers and I like plain English with no caveats.  'Any personal money in a bank account of any kind under £85,000 per person is covered by the £85,000 guarantee'  What's wrong with that? 

There is no FSCA. 
You are confusing the FCA (regulatory body) with the FSCS (industry-funded compensation scheme).

As for what is wrong with the statement about which you asked: that statement would not be true - there are caveats.
The potential overlap of banking licences and whether or not the organisation is actually registered with, and approved by, the FCA, for example.

colsten

Johnny4x4 said:

 I think that most savers assume that if a financial crash occurs the government will pay them their <85,000 in a lump but I suspect that won't happen and that the government will pay in instalments.

It is not the government that pays but the FSCS. The FSCS is a statutory body, funded by the financial services industry. Information on how, and in what timescales, the FSCS pays, and lots of other useful and factual information, is provided on their website.