If you don't know how much of your savings would be protected should your bank or building society collapse, you're not alone. Just 12 per cent of people are aware what the compensation level is, says shock research published today by the Financial Services Compensation Scheme.
The Scheme protects people's savings if an authorised UK financial firm gets into trouble. But the amount of money protected is limited. If you have more savings than the limit with one firm, your cash is not safe.
Therefore knowing what the limit is is crucial in ensuring you don't risk losing out if a firm goes bust.
For years, the limit – for savings –stood at just £35,000, which meant those with healthy deposits had to spread their money around among different financial institutions to get full protection. That's because the limit is per account, per institution – not based on your total savings.
After the banking crisis of 2008 when the Government had to step in to protect many people's savings, the amount was increased. In December 2010, new rules were introduced across Europe to harmonise limits at €100,000. For the UK, the limit was fixed at £85,000.
Don't assume that you will never need the compensation scheme. It has helped more than 4.5m people and paid out more than £26bn since 2001. Mark Neale, chief executive of FSCS, said: "The £85,000 deposit limit protects the overwhelming majority of savers, and the scheme will pay out in seven days."
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