Getting savings together of over £85,000

AdrianC

GDB2222 said:

AdrianC said:

Hallux said:

If you need to bring various savings together (e.g. cashing in Stock Market funds)  to pay towards your new home and they total over £85,000 then how can you do this safely with a bank or building society when they only cover you with protection for £85,000?

In the unlikely event a major UK bank does go bust, I'm not convinced the FSCS cap is going to be terribly great comfort or even particularly relevant.

Firstly, the gov't are unlikely to actually let a major UK bank go pop. As with the 2008 crisis, they'd be more likely to bail the bank itself out.

Even if they did, the political fallout from leaving people out of pocket would be too great - the government would likely just cover losses anyway. It's what they did last time, when the Icelandic banks went under.

Finally, the delays that would inevitably happen between the failure and the receipt of coverage would almost certainly scupper the purchase anyway - and that's if the purchase had survived the market turmoil that had brought the bank down anyway.

UK FSCS protection is almost certain to be reviewed at some point in the near future - remember, the reason for the slightly odd £85k figure is that it's actually €100k, because the FSCS is an EU-mandated scheme...

We are seeing this playing out right now, with energy companies. The protection scheme works fine when one small company goes wrong, but it can’t help when the whole sector is in trouble.

Look back a decade and a bit.

The FSCS didn't have enough funds to cover the Icelandic failures. The treasury covered all savings - beyond the cap, which was then £50k. The Icelandic gov't scheme was just £20k at the time.

What happened when several major banks were on the brink? The gov't prevented them going under, rather than bailing out the creditors of failed banks.

eddddy

canaldumidi said:

You can have upto £1M protected by FSCS.

https://www.fscs.org.uk/making-a-claim/claims-process/temporary-high-balances/

As you say, FSCS temporarily protects high balances resulting from money deposited in preparation for buying a property, the proceeds of sale of a property etc.

But I can't see any definition of what "money deposited in preparation for buying a property" means.


It's easy to provide evidence that money is 'proceeds of the sale of a property' - but what evidence would the FSCS want to show that money has been 'deposited in preparation for buying a property'?

Is it enough to say...

1. "I was looking for a property to buy", or
2. "I've made an offer on a property to buy" or 
3. "I've exchanged contracts to buy a property"

Option 1 would be open to massive abuse - anyone making a recent large deposit could claim that.
Option 2 - people could make 'fake' offers on property, in order to get protection for large deposits
 
So I wouldn't be surprised if the FSCS would only provide protection, it you've exchanged contracts.

Davesnave

user1977 said:

GDB2222 said:

AdrianC said:

Hallux said:

If you need to bring various savings together (e.g. cashing in Stock Market funds)  to pay towards your new home and they total over £85,000 then how can you do this safely with a bank or building society when they only cover you with protection for £85,000?

In the unlikely event a major UK bank does go bust, I'm not convinced the FSCS cap is going to be terribly great comfort or even particularly relevant.

Firstly, the gov't are unlikely to actually let a major UK bank go pop. As with the 2008 crisis, they'd be more likely to bail the bank itself out.

Even if they did, the political fallout from leaving people out of pocket would be too great - the government would likely just cover losses anyway. It's what they did last time, when the Icelandic banks went under.

Finally, the delays that would inevitably happen between the failure and the receipt of coverage would almost certainly scupper the purchase anyway - and that's if the purchase had survived the market turmoil that had brought the bank down anyway.

UK FSCS protection is almost certain to be reviewed at some point in the near future - remember, the reason for the slightly odd £85k figure is that it's actually €100k, because the FSCS is an EU-mandated scheme...

We are seeing this playing out right now, with energy companies. The protection scheme works fine when one small company goes wrong, but it can’t help when the whole sector is in trouble.

To be fair, if the whole banking system were in meltdown I'm not sure how many people would be keen to proceed with buying a house... 

What would be most desirable in that situation, a roof over your head or a promise  to pay.....whenever?

Of course, I'm talking cash, not more debt, and if one's young, less rooted, skilled etc getting the hell out might give other options.

Wanting bricks & mortar again was our thought when Northern Wreck and the various Icelandic banks went down. Got off the fence sharpish and bought outright. We haven't regretted it.

Gavin83

AdrianC said:

GDB2222 said:

AdrianC said:

Hallux said:

If you need to bring various savings together (e.g. cashing in Stock Market funds)  to pay towards your new home and they total over £85,000 then how can you do this safely with a bank or building society when they only cover you with protection for £85,000?

In the unlikely event a major UK bank does go bust, I'm not convinced the FSCS cap is going to be terribly great comfort or even particularly relevant.

Firstly, the gov't are unlikely to actually let a major UK bank go pop. As with the 2008 crisis, they'd be more likely to bail the bank itself out.

Even if they did, the political fallout from leaving people out of pocket would be too great - the government would likely just cover losses anyway. It's what they did last time, when the Icelandic banks went under.

Finally, the delays that would inevitably happen between the failure and the receipt of coverage would almost certainly scupper the purchase anyway - and that's if the purchase had survived the market turmoil that had brought the bank down anyway.

UK FSCS protection is almost certain to be reviewed at some point in the near future - remember, the reason for the slightly odd £85k figure is that it's actually €100k, because the FSCS is an EU-mandated scheme...

We are seeing this playing out right now, with energy companies. The protection scheme works fine when one small company goes wrong, but it can’t help when the whole sector is in trouble.

Look back a decade and a bit.

The FSCS didn't have enough funds to cover the Icelandic failures. The treasury covered all savings - beyond the cap, which was then £50k. The Icelandic gov't scheme was just £20k at the time.

What happened when several major banks were on the brink? The gov't prevented them going under, rather than bailing out the creditors of failed banks.

The only reason the Government bailed out the banks was because of the potential impact to the economy.

On an individual basis I’m not really sure why it’s the Governments responsibility to bail out individuals for the failure of a private company. They don’t cover losses from any other sectors. I expect the schemes exists for no more than to re-enforce trust in the banking system.

AdrianC

Gavin83 said:

On an individual basis I’m not really sure why it’s the Governments responsibility to bail out individuals for the failure of a private company. They don’t cover losses from any other sectors. I expect the schemes exists for no more than to re-enforce trust in the banking system.

And also because, if the UK banking system was unprotected, everybody would put their money in banks outside the UK...

The FSCS is an EU scheme. Until this January, the UK government had no choice.
https://ec.europa.eu/info/business-economy-euro/banking-and-finance/financial-supervision-and-risk-management/managing-risks-banks-and-financial-institutions/deposit-guarantee-schemes_en

It would be political suicide to bin it now, just because they can.

Hallux

Is the Bank / B. Soc £85,000 limit per person or per account?

Hallux

Hallux said:

Is the Bank / B. Soc £85,000 limit per person or per account?

(e.g. if a person has a current account and also a deposit account)

user1977

Hallux said:

Is the Bank / B. Soc £85,000 limit per person or per account?

Per person, per bank (which means the parent bank, so e.g. it's one £85k limit covering your HSBC and First Direct accounts).