1 Million Financial Services Compensation Scheme

Video and article on why you should not be fooled with the £1 Million Bank Deposit Financial Services Compensation Scheme.

Transcript:

“Hello there, this is a very simple introduction to the new £1 million investors’ compensation scheme.  The deposit protection fund payable by the financial services compensation scheme, the FSCS if a bank goes under.

So in simplistic terms, currently for bank deposits, bank and building society deposits your protection is £85,000 per person, per banking licence.  So if you have a joint account: husband and wife, partners, civil partners whatever, it might be common-law spouses, then £85,000 each, total £170,000 with one bank or one banking licence I should stress.

Now, there has been consultation going back into July 2014 and it is now about to become law with effect next year where compensation is being moved up, your capital protection is being moved up to £1 million per person, per bank account but don't be fooled by this. The true, real protection is still only £85,000 per person.

This £1 million protection is to do with only temporarily deposits.

For example:

• You sell your property or
• You sell some investments or
• You receive compensation for an injury or illness or anything like that

So only if you temporarily have money up to £1 million in a bank or a building society, in a finance institution, on deposit then that £1 million temporary cover for three months only. There may be, in certain circumstances, there may be some protection where that can be extended but understand the financial services compensation scheme limit is not £1 million for all, it is still £85,000 per person per bank licence with £1 million protection for temporary deposits.

What I will now add is a spanner in the works to that as well.  That's for individuals, what if you are a business?  What if you are a large business?  What if you are a finance company or an investment company or indeed local government or a credit union?

This investors compensation scheme, it covers some small businesses but not all, it does not cover credit unions for their own money, yes it will cover for clients individual deposits inside a credit union but not their own money.  For investment companies and finance companies, I run an investment company, I don't have any financial services compensation scheme protection for my limited company because it's a finance company. 

So be aware:

1. If you're running a business particularly if you're running a finance related business or indeed
2. If your local council or a government-sponsored body or group

You are not protected by the financial services compensation scheme, so you don't even get the £85,000 let alone the £1 million and then for:

Private investors, for individuals e.g. me personally, not as part of my company, £85,000 is still the compensation scheme limit with up to £1 million protection but only on a temporary basis up to 3 months.  So that’s the new compensation scheme rules and the £1 million pound compensation scheme limit explained.  Any questions or if you're not sure, please do contact us. Thank you very much for watching.”