This week has seen the announcement that the Yorkshire and Chelsea building societies may be joining forces in a possible merger. Many customers will be unsure about the implications for their savings. This week we look at the Financial Services Compensation Scheme (FSCS), what it means and how it protects you.
What is it?
The FSCS was established in 2001; however many consumers were unaware of its existence until the run on Northern Rock highlighted the fact that cash held wasn't necessarily as safe as they thought.
The FSCS guarantees the first £50,000 of savings with one institution, £100,000 for joint savings, in the event that your savings provider goes into administration. If you have more than £50,000 in cash savings the way to protect all of it is to spread it between different providers.
What would a merger between Chelsea and Yorkshire mean for me?
At present this is only a proposed merger; building societies are effectively owned by their members so any plans to merge would have to be approved by them first. Because the Yorkshire and Chelsea are two separate entities, savers with cash invested in both societies will still be covered separately under the terms of the FSCS.
Anyone who currently has a savings account with both will have £100,000 protection in total (£200,000 if the accounts are in joint names). If the merger does take place existing customers will benefit from this level of protection until 30 December 30 2010.
Once a merger has been ratified, Yorkshire and Chelsea will be classed as a single entity for new customers. Anyone who opens savings accounts post-merger will only have the standard £50,000 of protection even if they open an account with Yorkshire and with Chelsea.