Are your savings safe? article discussion

Testee

Can anyone give me an answer to this - I tried the FSA (as was) and couldn't understand their response! How does the £85k maximum relate to savings held in an offset mortgage?
For example if I have a £300k mortgage and £150k in a savings account that offsets against my mortgage what would happen if the institution failed - would I still have a £300k debt but only have £85k in savings?!?!
Can anyone advise? Thanks

silvermum

Can anyone tell me if an executor's bank account is counted as 'separate' to a personal one at the same bank for the purposes of FSA compensation?

I am sole executor for my late father's estate, and have opened an executor's account at my bank, for ease of operation (can use it online etc) but I'm wondering if the total across all my accounts + the exec acct shouldn't exceed £85k, or if it's separate? There is lots of money to transfer in, so I'm hoping it's covered by it's own '£85k' ?

innovate

I can't recall having seen an answer to this question before, and searching the FSCS website doesn't yield a quick answer. You'd probably do best contacting them directly
http://www.fscs.org.uk/contact-us/

Please feed back on the answer you get

YorkshireBoy

innovate wrote: »

I can't recall having seen an answer to this question before, and searching the FSCS website doesn't yield a quick answer.

Here's what YBS's FSCS factsheet says...

What if I am a Personal Representative/Executor on an account?

Where a person claims as a personal representative of someone who has died, the claimant will be treated in respect of that claim as if he or she were standing in the shoes of the deceased. Such a claim would not count towards any claim the personal representative has in their personal capacity.

http://www.ybs.co.uk/documents/YBM0870MRGI_fscs_factsheet.pdf

silvermum

Thanks! That's exactly what I needed to know!

innovate

silvermum wrote: »

Thanks! That's exactly what I needed to know!

Although it is very likely that the YBS terms would be the same at other banks and BSs, you should verify that they indeed are at the bank/BS you have your accounts.

John_Pierpoint

They don't need to be. The YBS is just restating the position of trustees for the sake of clarity.

innovate

silvermum wrote: »

Can anyone tell me if an executor's bank account is counted as 'separate' to a personal one at the same bank for the purposes of FSA compensation?

Your personal accounts are separate from those of the estate, also for the purposes of FSCS (not FSA) protection. Call the FSCS on 020 7741 4100 or 0800 678 1100 if you want them to confirm it.

David160

What happens if you have, for example, a mortgage of £100,000 and a savings account of £120,000, with the same institution?

Do you get £20,000 (£120,000 - £100,000) back, with your mortgage fully paid off; or £85,000 savings and the £100,000 mortgage still owing?

Ie., can you offset the savings account against the mortgage, before invoking the £85,000 compensation?

What if the 2 accounts have some formal link, for example, offset mortgage accounts?

This question is not answered in the main article, can it be updated to include the answer?

innovate

From 1 January 2011, set off is no longer being applied by the FSCS. This means if a depositor owes a bank money, the debt is no longer set off against the positive balance when calculating the amount of the protected deposit. Instead the Scheme pays compensation as a gross payout up to the limit of £85,000.

Removing set off is designed to help speed up payment and ensure that eligible depositors do not lose liquidity in the event of a default.

Negative balances such as overdrafts, credit cards and certain types of “off set” mortgage accounts (where the savings and loan elements cannot be separated) are now excluded by the FSCS. However, under insolvency law, the remaining deposit balance, anything over £85,000, is automatically set-off against any debts in the liquidation, meaning consumers debts will be reduced by that excess amount.

How are offset mortgages dealt with?

If a deposit account is separate from the mortgage balance, it would be dealt with separately and compensation would be calculated on a gross basis. However, if the deposit account is combined with the mortgage account and operated as one large overdraft, the FSCS would have to treat it as an overdraft and no compensation would be payable. It is important that consumers appreciate the difference between these accounts.

If the accounts are separate the FSCS would pay compensation up to the limit and the remainder would automatically be set-off against the debt (or in this case mortgage) under insolvency law.

Source: http://www.fscs.org.uk/industry/sub-schemes/accepting-deposits/payout-arrangements-from-1-january-2011/