Are your savings safe? article discussion

Patr100

naedanger said:

Patr100 said:

NottinghamKnight said:

masonic said:

NottinghamKnight said:

I don't dispute that, my point is that people don't understand what  may be stated and dishonest people will write things that the average person will take as indicating authorisation, or a guarantee, without realising this isn't true, people need be wary and question any financial interaction, especially with little known counterparties. 

Indeed, many scam sites claim to be properly authorised and may give convincing guarantees that turn out to be completely worthless when they disappear with the money they've collected some weeks or months later.

I posted a thread a couple of years ago explaining how to verify whether you are saving into an FSCS protected deposit account, or investing into an FSCS protected investment account: https://forums.moneysavingexpert.com/discussion/5892874/when-fscs-protection-does-not-apply

If you have verified that a firm is authorised and holds the appropriate permissions, it is safe to rely on what you are being told about the specific account you are opening, and since some firms my offer a mixture of regulated and unregulated products, it is worth confirming FSCS protection does apply to the product you are opening and whether it is the protection for deposits or investments if this is in any doubt. Obviously protection for investments does not protect you from losing some or all of your capital due to your investments losing value.

It is safe to rely on what the authorised firm is telling you, because even if they tell you that you are putting your money in a savings account with FSCS protection for savings and this turns out to be true, while you won't have that protection, you will have a complaints route through which to claim compensation via the Financial Ombudsman Service if required, which can be referred to the FSCS if the firm cannot pay and goes into administration.

In the case of Mango Money Markets, no FCA authorisation means no access to the Financial Ombudsman Service and virtually no hope of getting any money back.

If only it were that simple. A firm can be authorised and be acting outside it's remit, there may be the ability to complain but there's no guarantee of any compensation or restitution. Many people have invested in bonds that implied FSCS protection which wasn't the case and have lost their money as a result, and the whole LCF debacle. I still have a small but not insignificant amount tied up in Collateral P2P which was authorised according to the register, but the FCA subsequently denied this (good reason to take screenshots before the regulator can change it's own website, let alone dodgy companies). My point is that don't think that a firm which may be regulated provides any guarantees, it's all managing risk and reducing that risk exposure where possible, and FCA regulated can mean simply being able to sell basic insurance policies rather than being covered for full and wide ranging financial advice.

This is what they also say. However "exactly the same as if you placed the deposit directly" implies they are a "middleman".

2.3 DO I MAINTAIN FSCS PROTECTION WITH DEPOSITS MADE THROUGH MANGO MONEY MARKETS ?
Yes. The level of protection is exactly the same as if you placed the deposit directly. In the event that one of the banks on the platform goes into administration, assuming the bank in question was a member of the Financial Services Compensation Scheme (FSCS), then our client (if eligible) would have a single claim under the FSCS limited to the deposit compensation limit of £85,000.¹
Equivalent compensation rules would apply for any EU Bank on the platform going into administration, under the deposit protection arrangements in their “home” EU member state.
¹FSCS deposit protection is £85,000 per depositor per bank (as at 15 November 2018). For more information please refer to fscs.org.uk

 

"I have you are not thinking, even for a second, of giving them any money. The FCA warning is very clear." Do you think I'm stupid? I'm obviously just showing the slippery wording they use. 
You're not the only one who has read and understood the obvious FCA warning!

Patr100

naedanger said:

Patr100 said:

NottinghamKnight said:

masonic said:

NottinghamKnight said:

I don't dispute that, my point is that people don't understand what  may be stated and dishonest people will write things that the average person will take as indicating authorisation, or a guarantee, without realising this isn't true, people need be wary and question any financial interaction, especially with little known counterparties. 

Indeed, many scam sites claim to be properly authorised and may give convincing guarantees that turn out to be completely worthless when they disappear with the money they've collected some weeks or months later.

I posted a thread a couple of years ago explaining how to verify whether you are saving into an FSCS protected deposit account, or investing into an FSCS protected investment account: https://forums.moneysavingexpert.com/discussion/5892874/when-fscs-protection-does-not-apply

If you have verified that a firm is authorised and holds the appropriate permissions, it is safe to rely on what you are being told about the specific account you are opening, and since some firms my offer a mixture of regulated and unregulated products, it is worth confirming FSCS protection does apply to the product you are opening and whether it is the protection for deposits or investments if this is in any doubt. Obviously protection for investments does not protect you from losing some or all of your capital due to your investments losing value.

It is safe to rely on what the authorised firm is telling you, because even if they tell you that you are putting your money in a savings account with FSCS protection for savings and this turns out to be true, while you won't have that protection, you will have a complaints route through which to claim compensation via the Financial Ombudsman Service if required, which can be referred to the FSCS if the firm cannot pay and goes into administration.

In the case of Mango Money Markets, no FCA authorisation means no access to the Financial Ombudsman Service and virtually no hope of getting any money back.

If only it were that simple. A firm can be authorised and be acting outside it's remit, there may be the ability to complain but there's no guarantee of any compensation or restitution. Many people have invested in bonds that implied FSCS protection which wasn't the case and have lost their money as a result, and the whole LCF debacle. I still have a small but not insignificant amount tied up in Collateral P2P which was authorised according to the register, but the FCA subsequently denied this (good reason to take screenshots before the regulator can change it's own website, let alone dodgy companies). My point is that don't think that a firm which may be regulated provides any guarantees, it's all managing risk and reducing that risk exposure where possible, and FCA regulated can mean simply being able to sell basic insurance policies rather than being covered for full and wide ranging financial advice.

This is what they also say. However "exactly the same as if you placed the deposit directly" implies they are a "middleman".

2.3 DO I MAINTAIN FSCS PROTECTION WITH DEPOSITS MADE THROUGH MANGO MONEY MARKETS ?
Yes. The level of protection is exactly the same as if you placed the deposit directly. In the event that one of the banks on the platform goes into administration, assuming the bank in question was a member of the Financial Services Compensation Scheme (FSCS), then our client (if eligible) would have a single claim under the FSCS limited to the deposit compensation limit of £85,000.¹
Equivalent compensation rules would apply for any EU Bank on the platform going into administration, under the deposit protection arrangements in their “home” EU member state.
¹FSCS deposit protection is £85,000 per depositor per bank (as at 15 November 2018). For more information please refer to fscs.org.uk

 

I have you are not thinking, even for a second, of giving them any money. The FCA warning is very clear.

Do you think I'm stupid? I'm obviously just showing the slippery wording they use. You're not the only one who has read and understood the FCA warning!

masonic

NottinghamKnight said:

Masonic - The issue around LCF, and similar schemes, is that it was being advertised in national newspapers to give the impression that deposits were safe when they were not, and were inappropriate when they attracted people whose understanding was that these 'bonds' were savings accounts. In a similar manner to P2P there was a much delayed acknowledgement that such schemes should be restricted to high net worth or self certificating experienced investors which is why we now have such tests on P2P sites.
In relation to Collateral the mantra was to check the register, the fact there now appeared to have been multiple registers and that companies could change their own entries on the FCA register was a major failing; I believe it was the cause of much 'regret' from our BoE governor in his previous role.
Bottom line is that inexperienced savers need to be careful in dealing with any unfamiliar firms and I'd personally advise against doing so given the typical minimal interest rate benefit that is generally on offer. 

I would agree with most of that - relying on information in ads on Facebook, or searching "best savings rates" on Google and believing all of the results will be genuine is certainly a big no no. More should be done to stop the dodgy advertising and these sites placing on search rankings. The FCA was asleep at the wheel on that count, and that of P2P, which should never have been promoted in the way it was or subjected to the 'light-touch' regulatory regime it still enjoys. The serious issues surrounding Collateral and other failed P2P firms did not cast any uncertainty over whether FSCS protection was afforded to investors in those P2P products - it was clearly stated that they did not have such protection. Still, it is clear that people did not, and still don't, understand the risks. But remember that LCF bonds were restricted in the way P2P investments now are, and that didn't stop a lot of people self-certifying as restricted investors and then ignoring the warnings to limit their investment to <10% of their net assets. I have little faith in the new measures having the desired effect - there are still people who don't understand why they can't take their investment out of RateSetter for example.

There were big problems with the interim register used for OFT companies in transition to FCA regulation, but no evidence that the proper FCA register allowed firms to have their entry on the register doctored in the same fashion. The interim register is now gone. I may be misremembering, but I believe the 'regret' comments were around the FCA failing to remove expired companies from the register, allowing clone firms to spring up and exploit the defunct entry (even after receiving warnings from members of the public and financial services professionals - I've reported enough only to see no action taken, but I'm just a consumer, it's really bad if an IFA isn't listened to).

The steps I have outlined around checking for specific regulatory permissions, combined with cross-referencing company number and website address, and carefully reading the terms around the product on offer, is the best that can be done and would allow the diligent consumer to avoid all instances where they might have thought they were opening a savings account but were not, or where they thought they were taking out mainstream investments rather than unregulated ones. I can see that I won't be able to convince you that these measures are sufficient (I'm not one to believe zero risk exists in anything), but as many of the best saving and investing products are offered by companies that are not household names or familiar sights on the high street, it is just not practical advocate on MSE that people avoid many of the unfamiliar names like Marcus, iWeb, UBL, Al Rayan, Raisin, Nutmeg, Close Brothers, Paragon, Charter Savings Bank, etc, many of which are discussed here, but few of which most people would have heard of were it not for this site and perhaps bumping into some advertising. To add to the unfamiliarity, even the big familiar names are regularly going through M&A, name changes, rebranding and operating under new 'trading styles' - it becomes difficult to keep up.

Cadrydwr

"FSCS protects 100% of the first £85,000 you have saved"

Isn't it long overdue for this £85,000 limit to be raised?
Once again the UK is falling behind compared to other countries.

eskbanker

Cadrydwr said:

"FSCS protects 100% of the first £85,000 you have saved"

Isn't it long overdue for this £85,000 limit to be raised?
Once again the UK is falling behind compared to other countries.

It was set at that level to align with the €100K EU figure, which remains the same - which countries are you thinking of?

Cadrydwr

eskbanker said:

Cadrydwr said:

"FSCS protects 100% of the first £85,000 you have saved"

Isn't it long overdue for this £85,000 limit to be raised?
Once again the UK is falling behind compared to other countries.

It was set at that level to align with the €100K EU figure, which remains the same - which countries are you thinking of?

For example, the US guarantees deposits up to $250,000

eskbanker

Cadrydwr said:

eskbanker said:

Cadrydwr said:

"FSCS protects 100% of the first £85,000 you have saved"

Isn't it long overdue for this £85,000 limit to be raised?
Once again the UK is falling behind compared to other countries.

It was set at that level to align with the €100K EU figure, which remains the same - which countries are you thinking of?

For example, the US guarantees deposits up to $250,000

Yes, but that's been that way for many years, so it's not really something the UK is 'falling behind' as such, i.e. we've always been well adrift of that level (which also hasn't changed since at least 2010).

RG2015

Cadrydwr said:

eskbanker said:

Cadrydwr said:

"FSCS protects 100% of the first £85,000 you have saved"

Isn't it long overdue for this £85,000 limit to be raised?
Once again the UK is falling behind compared to other countries.

It was set at that level to align with the €100K EU figure, which remains the same - which countries are you thinking of?

For example, the US guarantees deposits up to $250,000

I wasn't aware of this and am surprised that the US would guarantee more than Europe and the UK.

I did though see an article in Bloomberg suggesting that there was recent talk of lowering or even scrapping it. This, despite the article being titled with the opposite suggestion of making it unlimited.

Could the US Really Guarantee All Bank Deposits?

A once-unthinkable measure is being floated in Washington’s corridors of power as a possible way to ease the strains suddenly bearing down on small and regional US banks. Normally, the Federal Deposit Insurance Corp. guarantees bank deposits up to $250,000, a limit high enough to make most bank customers sleep easily at night. But recent stresses in the banking industry have put a temporary increase of the cap, or scrapping it, on the table.


https://www.bloomberg.com/news/articles/2023-03-22/can-us-guarantee-all-bank-deposits-why-fdic-is-considering-raising-the-limit?leadSource=uverify wall#xj4y7vzkg

 

RG2015

Cadrydwr said:

"FSCS protects 100% of the first £85,000 you have saved"

Isn't it long overdue for this £85,000 limit to be raised?
Once again the UK is falling behind compared to other countries.

There are always workarounds for us in the UK.

NS&I is unlimited although rates tend to be lower than the commercial equivalents.

And of course splitting funds into £85k (ish) segments with different licence holders works for most private individuals.

As an aside, I remember just before the GFC my company's American owners panicking about their European cash reserves.

They carried out a risk assessment and declared that everything apart from working funds had to be moved to one of only three banks. They were, wait for it...


Lloyds
JP Morgan London 
and...... drum roll....


Credit Suisse 

TheBanker

Cadrydwr said:

"FSCS protects 100% of the first £85,000 you have saved"

Isn't it long overdue for this £85,000 limit to be raised?
Once again the UK is falling behind compared to other countries.

There were reports in the press a couple of months ago that the Bank of England is considering whether the limit should be raised.

E.g. https://www.theguardian.com/business/2023/apr/13/why-move-to-bolster-uk-savings-protection-harks-back-to-financial-crisis#:~:text=The FSCS limit was soon,failure was £15.65bn.