Page last updated at 13:44 GMT, Monday, 19 May 2008 14:44 UK

Ask the expert: Are my savings safe?

Northern Rock
The system was changed to ease the Northern Rock crisis

BBC News Ask the Expert column offers the answers to some common financial questions.

Brian Capon from the British Bankers' Association explains how safe savings are and what kind of protection savers have in the event of a UK regulated bank or building society going bust.

The rules were changed by the government in 2007 in response to the crisis at Northern Rock.

Brian Capon writes:

Deposits with all authorised banks and building societies in the UK are protected under the Financial Services Compensation Scheme (FSCS).

Since 1 October 2007 the scheme provides 100% protection for up to 35,000 per customer if a firm is unable to pay claims against it, for instance where a firm stops trading or is insolvent.

Prior to that date, the limit was 100% of the first 2,000, then 90% of the next 33,000.

For the purposes of the scheme, where an account is held in joint names, each joint account holder will be treated as holding an equal share of the funds in an account, unless there is evidence to show otherwise, and will be entitled to claim compensation on their share.

If a depositor owes money to the bank or building society, this will be deducted from any deposits held before compensation is calculated.

The independent scheme is funded by compulsory levies on the financial services industry.

The limit applies to each authorised institution.

Some banks are authorised at a group level, which means that the 35,000 limit will apply for the whole of the group. In other words, if more than one bank within that group failed, the maximum total amount that could be claimed per person would be 35,000 even though the customer may have separate accounts with different banks in that group.

Where several banks within a group are authorised in their own right (as opposed to on a group basis), a separate 35,000 limit would apply to each of those banks individually.

You can check whether an institution is authorised at a group level or as a separate entity by checking the authorised firms register through the Financial Services Authority's website www.fsa.gov.uk. If you are still unsure, you can contact the FSA consumer helpline on 0845 606 1234.

More information on the Financial Services Compensation Scheme, which also covers insurance and investments (different limits apply), can be found on the FSCS website www.fscs.org.uk.

The opinions expressed are those of the author and are not held by the BBC unless specifically stated. The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.


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