Not investing the full £85,000 covered under the FSCS

dj_air_eye

If you're fortunate enough to have £85,000 to invest in a savings account it may be prudent to not invest the full amount in one institution.
Under the scheme any accrued interest is also covered **up to a maximum of £85,000**
Let's say you invested £85,000 in a one year bond at 6.05% (currently the best rate) and your bank went bust after 364 days you would be over £5,000 out of pocket.

Although this is clear on the FSCS website I don't see this mentioned generally on financial websites.

Doctor_Who

dj_air_eye said:

If you're fortunate enough to have £85,000 to invest in a savings account it may be prudent to not invest the full amount in one institution.
Under the scheme any accrued interest is also covered **up to a maximum of £85,000**
Let's say you invested £85,000 in a one year bond at 6.05% (currently the best rate) and your bank went bust after 364 days you would be over £5,000 out of pocket.

Although this is clear on the FSCS website I don't see this mentioned generally on financial websites.

Many posts about this on the MSE forum. Suggestion is to only save around £80K so that any interest is also covered by the FSCS £85K limit.

SickGroove

I assume 85K with all interest paid away monthly would negate this so holding 85K with one institution should be fine in that instance?

Doctor_Who

SickGroove said:

I assume 85K with all interest paid away monthly would negate this so holding 85K with one institution should be fine in that instance?

Yes, as long as it's paid away to a different provider that doesn't share the same banking licence. You risk the monthly interest going over the £85K limit, but that's a minor consideration.

dunstonh

Not investing the full £85,000 covered under the FSCS

It's worth emphasising that investments have their own FSCS protection levels, and its best to stick to referring to savings as savings or deposits to avoid confusion.

necronom

Me and someone at work were talking about this last week.  What we were wondering is what do millionaires do?  Surely they don't have it all split into 85K chunks.  And Billionaires?  Are they risking everything on a few banks not going bust?

Doctor_Who

necronom said:

Me and someone at work were talking about this last week.  What we were wondering is what do millionaires do?  Surely they don't have it all split into 85K chunks.  And Billionaires?  Are they risking everything on a few banks not going bust?

They won't be holding most of their millions or billions as cash in the bank.

jimjames

necronom said:

Me and someone at work were talking about this last week.  What we were wondering is what do millionaires do?  Surely they don't have it all split into 85K chunks.  And Billionaires?  Are they risking everything on a few banks not going bust?

Millionaires won't generally have their money as cash and certainly billionaires are generally only so because they own companies such as Amazon. Many people also don't rigidly stick the FSCS limits if they consider the bank to be safe

Albermarle

Although this is clear on the FSCS website I don't see this mentioned generally on financial websites.

It is mentioned on this forum on an almost daily basis.

Plus this is on MSE website

FSCS bank protection limit - Are my savings safe? - MSE (moneysavingexpert.com)

boingy

I think it's possible to worry too much about this stuff. I'm not advocating going way over the limits but the chance of an FSCS approved bank going under is vanishingly small and if you are fortunate enough to have a few thousand over the 85K in an account then you are not exactly going to be destitute if you lose that bit of it of it. Just review your accounts once a year and make any adjustments then.

If anything other than a very minor bank goes bust in the UK the big hit won't be on your savings. It will be on your pension, your investments and possibly your job!

dj_air_eye

Albermarle said:

Although this is clear on the FSCS website I don't see this mentioned generally on financial websites.

It is mentioned on this forum on an almost daily basis.

Plus this is on MSE website

FSCS bank protection limit - Are my savings safe? - MSE (moneysavingexpert.com)

Where does it say in this article about not putting the full £85,0000 cash in a savings account to fully protect yourself against losing accrued interest?