Consumer Rights: With due care, Britons can avoid the same plight as the Cypriots
The plan for the Nicosia government to seize its citizens' money should act as a spur to check all your cash is fully protected
Saturday 23 March 2013
The panic seen on the streets of Nicosia over plans to seize the savings of ordinary Cypriots has provided a wake-up call to all savers, even in the UK.
For the vast majority of British savers and investors there is absolutely nothing to worry about. Your money is protected by the Financial Services Compensation Scheme (FSCS). However, there are some people who should check to make sure they're money is fully protected.
If you don't want to take any risks only deal with financial firms which are regulated by the Financial Services Authority (FSA) soon to become the Financial Conduct Authority. The FSA is the regulator responsible for giving licences to the banks, building societies and credit unions as well as investment or insurance companies.
Use the FSA website fsa.gov.uk to check that firms are authorised. If you have money in an unauthorised organisation it could be at risk because it doesn't come under the protective wing of the FSCS.
Check how much of your savings or deposit will be protected. The first £85,000 in a deposit account in a bank, building society or credit union is completely protected and you will automatically get it back through the compensation scheme if the organisation goes bust.
If you have a joint account £170,000 is protected. Under this rule, 98 per cent of UK savers are fully protected. However, if you are lucky enough to have more money on deposit play safe by opening another account with a different financial institution. Each account will when be protected up to a limit of £85,000 (£170,000 in a joint account).
Check to make sure that your various deposit accounts are in financial institutions with separate FSA authorisations. Organisations may have different names but be part of the same financial institution. For example Yorkshire and Chelsea building societies are part of an institution with one FSA Authorisation so if you have accounts in both you are only covered for one lot of £85,000 (or, again, £170,000 in a joint account.)
The same applies to accounts held in Lloyds TSB and Cheltenham and Gloucester. You will find details of the banks and building societies that share FSA authorisations on the website fsa.gov.uk/consumerinformation/ compensation/brands).
Sometimes people who usually have much less than £85,000 in a deposit account go over the limit. If you sell your home you might have more in your account for a while before you buy your new home. If you're left some money in a legacy you might go over the limit.
If you're lucky enough to win £1m on the premium bonds, split up the money between several different accounts to a maximum of £85,000 in each, until you decide how to invest your winnings. If you won £41m on the Lottery, like one couple last year, you'd need 240 joint accounts to spread your money safely around.
As far as Cyprus is concerned unless you have a lot of money in a bank in Cyprus you have nothing to worry about. There are two Cypriot banks operating in the UK. The Bank of Cyprus is a UK authorised subsidiary and so the UK compensation rules (up to £85,000) apply to your deposits.
Laiki Bank UK, is a branch of a Cypriot bank that is operating in UK under EU rules.
Q: I'm married and have a child. My uncle sadly died recently and left me a sum of money. I assumed that if I die my husband would get everything. The house and all our savings are in both our names. However, a friend told me that isn't the case and that some could go to the government.
If I make a will can I make sure that doesn't happen?
SJ, Milton Keynes
A: For peace of mind it is best to make a will and talk to an accountant about inheritance tax. With or without a will your husband would keep the house and the money in the joint accounts as they are in his name. The same would apply to you if he dies.
If you die intestate – without a will – and are married (or in a Civil Partnership) with a child, your husband will inherit all your personal property and the first £250,000 of your estate. Half the remaining estate will go to your child, and your husband will have a life interest on the rest. This means he can't spend it but he can use the interest from it. When he dies that capital will pass to your child.
A will allows you to clearly state how you want your estate divided. You can create a DIY will, but if you want to leave money for your child when he turns 18, say, there may be inheritance tax to consider so you should use a solicitor.
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