FSCS protection

Briskly

Apologies if this has been asked before but I couldn't find it on a search. I'm a little concerned as to how the FSCS protection applies to interest on savings accounts if it is paid annually. At todays high rates, for example, anyone lucky enough to have £85,000 in savings could accrue almost £5,000 in interest over the course of the year. If the institution were to go bust late in the term, would this mean that the £5,000 would be lost? It is not at all clear from looking at the FSCS site. It would appear to me that it is not covered. If so, there should surely be more warnings about this and advice to stick below £80,000? I'm concerned because it may be that more banks are likely to fail in this strange times and the effects of the surge in rates has not been considered. Would anyone have any definitive answer on this? 

masonic

The maximum you can receive in compensation in respect of one individual and one banking licence is £85,000, so you are correct that any interest that would have taken the balance over that figure would be forfeit (unless temporary high balance rules apply).

Briskly

masonic said:

The maximum you can receive in compensation in respect of one individual and one banking licence is £85,000, so you are correct that any interest that would have taken the balance over that figure would be forfeit (unless temporary high balance rules apply).

Thanks for this. It seems a tad unfair that one can benefit from the temporary high balance rules for very high balances but not
for the relatively modest interest over-run.  I wish there were warnings about this in the bank websites.

Albermarle

As above ideally you should keep below £85K in total, but I would not be panicking if it was slightly above that as there are no signs of any UK bank in trouble. Maybe a small bank could have some hidden issues but in that case they would most likely be just absorbed into a bigger institution. 

mebu60

It's an £85k limit. Calculate an amount allowing for interest if you are concerned about an institution failing.

masonic

Briskly said:

masonic said:

The maximum you can receive in compensation in respect of one individual and one banking licence is £85,000, so you are correct that any interest that would have taken the balance over that figure would be forfeit (unless temporary high balance rules apply).

Thanks for this. It seems a tad unfair that one can benefit from the temporary high balance rules for very high balances but not
for the relatively modest interest over-run.  I wish there were warnings about this in the bank websites.

Temporary high balance rules apply to any amount over £85k including any accrued interest that takes someone over the limit. You just need a qualifying life event. Those who are not in that position owing to such an even are free to spread their money around if they wish it all to be protected, but a primary consideration would be whether they need to hold that much cash in the first place.

VNX

There are lots of accounts paying very similar rates, calculate the balance to account for the interest payment and remaining 5k or so put in a different account  

Bigwheels1111

81k @ 5% risks £50, ie 81k+£4050 interest.

wmb194

Unless there's a compelling reason not to I almost always go for savings bonds that pay away interest every month. If you were at the maximum with one of these at worst you'd be risking a month's interest, not a year's.