In last week's Finance Fridays we were looking at tax self assessment forms as the deadline looms ever closer. If you need to complete one and haven't submitted it yet do it now!
For this week we're looking
at what happens to your money if things go wrong. If your bank,
building society, insurance company, credit union, mortgage broker,
pension company or investment firm goes bust then the Financial
Services Compensation Scheme (FSCS) can cover some of the amount
lost. Up to 31st December 2015 the standard amount covered
was £85,000 but since 1 January 2016 this has dropped to £75,000.
The £75,000 limit refers to
money held within one company. For example you could have three
accounts with the Toytown Bank such as a current account, ISA and
standard savings account but as an individual the maximum you would
be covered for is still £75,000 with this one company. The basic
advice is don't put your eggs all in one basket if you have more than
£75,000 invested with one company. Before you put any money into a
company check with the FSCS that they are registered and have a Firm
Reference Number (FRN) or authorisation number. Be aware that some
companies may be branded different but share the same parent company
and as such the same FRN so the £75,000 limit would still apply
across the two individual companies. One example of this is Halifax
and the Bank of Scotland.
Now I realise that most
people will be thinking that this issue doesn't concern them as they
don't have that much money in savings and investments. However, there
are times when you may come into money for example when selling a
house before buying another one, inheritance, pension lump sum,
insurance claim or redundancy payment. In such circumstances the FSCS
counts such large sums of money as a 'temporary high balance'. They
realise that when you first come into such large sums of money
through these circumstances you may need a little time to decide what
you will do with it. Therefore they give you a six month window to
move the money and in this time the compensation limit is increased
to £1 million. If after the six months your money is still in the
original account you deposited it in then the £75,000 limit comes
into force.
If you think by using
well-known high street bank or building society your money should be
safe let me just whisper the words Northern Rock. I was also working
in pensions during the whole Equitable Life mess back in the early
2000s when some people lost their entire pension funds. Have you ever
lost money when a financial institution has gone out of business?
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This has certainly gave me something to think about! Thanks for this post, brilliant information
ReplyDeleteLots of great information here Ness. I didn't know about the 'temporary high balance' window of 6 months.
ReplyDeleteThe temporary high balance clause only came into force in July last year. Thank goodness for fairness!
DeleteThankfully (sort of!) I've never had any money to lose, but it must be a nightmare for those that do!
ReplyDeleteThanks for writing these great informative posts. They are really useful and something we don't usually think of until it happens to us.
ReplyDeleteIf only I had enough money to worry about spreading it out - one day eh!
ReplyDeleteUseful advice and something to bear in mind, thank you!
ReplyDeleteI have claimed back PPI successfully a couple of times but having so many problems with our car finance as no-one is claiming resposibilty
ReplyDeleteLots to think about there, great post.
ReplyDelete