Easy Access Savings

Bigwheels1111

Nomates said:

I thought 85k being the upper safe limit not 84k ?

You are forgetting interest.

jimjames

Nomates said:

I thought 85k being the upper safe limit not 84k ?

Well I suppose if you want to use every penny of the limit you could pay in £80952 to stay inside the FSCS limit of £85k inc interest at 5%

happybagger

For my curiosity, if interest accrues but isn't paid out or credited to the account at the time of a collapse, covered?

Qyburn

I think he means if you start with £85K then as soon as it earns interest it goes over £85K. But a couple of side questions, what do people really think is the risk of a bank failing, and am I correct that it's only the amount over £85K that's unprotected and not the whole lot?  So for example if you had £90K and the bank fails, your first £85K is protected but you may lose the £5K

AmityNeon

happybagger said:

For my curiosity, if interest accrues but isn't paid out or credited to the account at the time of a collapse, covered?

When a bank (or another financial institution) is declared by the FSCS to be in default customers of the bank are invited by the FSCS to make a claim under the compensation scheme. If the claim is accepted by the FSCS as valid and the bank deposit paid interest then it is common for the FSCS to include in the compensation payment interest on the financial product up until the date that the bank was declared to be in default or if appropriate, up to the date of maturity of a fixed term deposit.

The FSCS calculates the compensation payable just as if the bank had not defaulted and so uses the bank’s records to determine whether the payment is net or gross.

Qyburn said:

But a couple of side questions, what do people really think is the risk of a bank failing, and am I correct that it's only the amount over £85K that's unprotected and not the whole lot?  So for example if you had £90K and the bank fails, your first £85K is protected but you may lose the £5K

Yes, up to £85,000 is protected. According to the FSCS 2020/2021 Annual Report:

• The financial year 2020/21 was FSCS’s most productive operational performance year to date despite an increase in the number of complex claims and remote working by FSCS’s people due to Covid-19. This included 99,528 claims decisions being made, of which more than 52,000 resulted in either paying people compensation or helping them transfer to a new investment or insurance policy.
• FSCS paid compensation to customers who had experienced losses from 1,131 failed firms, including 92 firms that failed during 2020/21.

wmb194

Nomates said:

I thought 85k being the upper safe limit not 84k ?

It is. A solution is to use an account that pays away interest every month. To cover accrued interest during the month you could still make your deposit a little less than than £85k but, meh. Depends really on how worried you are. Credit Unions are more likely to fail than banks or BSs so I'd worry more about those but they're not really mainstream.

eskbanker

AmityNeon said:

Qyburn said:

But a couple of side questions, what do people really think is the risk of a bank failing, and am I correct that it's only the amount over £85K that's unprotected and not the whole lot?  So for example if you had £90K and the bank fails, your first £85K is protected but you may lose the £5K

Yes, up to £85,000 is protected. According to the FSCS 2020/2021 Annual Report:

• [...]
• FSCS paid compensation to customers who had experienced losses from 1,131 failed firms, including 92 firms that failed during 2020/21.

But in terms of how that relates to the risk of banks failing, it's perhaps worth emphasising that FSCS paid out £584 million in that compensation, of which the grand total of £3.4 million (0.58%) was for cash deposits, which resulted from the failure of just two tiny credit unions.

Coincidentally it was exactly the same level of compensation paid out in 2021/22, with a slightly higher £4.83m attributed to cash deposits, again exclusively from failed small credit unions (four this time).

The overall cost of compensation in 2021/22 was the same as for 2020/21 at £584m. The main drivers of compensation this year continued to be claims in the LDII [Life Distribution and Investment Intermediation], Investment Provision and General Insurance Provision classes, which made up 98% of the total compensation costs. 

jaypers

It’s the first £85k that’s protected. If an institution folded, you would only lose the portion above this so if it’s only a few quid now and again, not worth worrying too much.