Expat savers dealing with unfamiliar banks are unlikely to know how much of their cash is protected if the foreign bank goes bust.
In Britain, the Financial Services Compensation Scheme (FSCS) safeguards up to £85,000 held by each person in accounts under a single banking licence.
Each building society has a banking licence, but protection with high street banks is blurred because several have more than one brand held under the same licence.
For instance, Lloyds Bank owns the Halifax, so a couple with £250,000 on deposit with the two banks only has £170,000 protected.
How much protection?
Dealing with offshore banks is a little more complicated, because even though the brand may be British, the compensation scheme that applies depends on where the offshore bank is based.
- European Economic Area
This covers the European Union plus Norway, Liechtenstein and Iceland.
Banks in Europe and the EEA offer financial safeguards on deposits under the Deposit Guarantee Schemes Directive. This offers 100,000 euros protection for each saver across one banking licence.
The Gibraltar Deposit Guarantee Scheme covers 100% of qualifying deposits up to of 100,000 euros
The Guernsey Banking Deposit Compensation Scheme protects the first £50,000 for each saver under each separate banking licence
Ireland is included in the EEA scheme but offers a top-up for Irish banks under the Eligible Guarantee Scheme. This covers accounts opened between the February 1, 2010 and March 28, 2013 with Allied Irish Bank, Anglo Irish Bank Corporation Limited, Bank of Ireland, Educational BS, Irish Life & Permanent and Irish Nationwide BS.
- Isle of Man
The Depositors’ Compensation Scheme safeguards up to £50,000 per person for each banking licence
The Depositors’ Protection Scheme covers up to £50,000 a person for each Jersey banking group.
Splitting your cash
For maximum financial safeguards, expats should split their savings so they do not bust the limit on any single banking licence.
For instance, The Permanent Bank in Ireland and Conister Bank on the Isle of Man offer some of the leading fixed rate savings for expats.
Investors should make sure they invest no more than 100,000 euros with the Permanent or £50,000 with the Conister to keep within the deposit protection limits – but this can be doubled up for couples and still keep all the cash safe.
Banks from outside the EEA or EU with branches inside the zones should also come under the deposit protection scheme of the country where the branch is based.