If you have cash with a financial institution, regulators in different financial jurisdictions have special rules to pay compensation if the bank or building society goes bust.
How the schemes work and how much compensation they pay varies between financial centres.
Here’s a list of the main schemes that protect British expat cash:
- UK – The Financial Services Compensation Scheme (FSCS) protects £85,000 per individual for each account held under the same banking licence.
That means if you have money on account with more than one brand trading under the same licence, the compensation is set at £85,000 regardless of how much cash is on deposit.
For example, the Bank of Scotland owns the Halifax, so only £85,000 is safeguarded across all accounts held with either brand.
From January 1, 2016, the protected limit drops to £75,000.
- European Economic Area (EEA) – The scheme works in the same way as the UK FSCS up to a limit of 100,000 euros
- Gibraltar – The safeguards under the Gibraltar Deposit Guarantee Scheme are for 100,000 euros per person
- Guernsey – The limit under the Guernsey Banking Deposit Compensation Scheme is £50,000 for an individual
- Isle of Man – The Isle of Man Depositors’ Compensation Scheme is £50,000 a person
- Jersey – The Jersey Depositors’ Compensation Scheme is for £50,000 a person
- Non UK/EEA – Each country’s regulator has different rules and many may have no deposit protection scheme, so ask the bank before putting any cash on deposit.
The risk for expats with offshore savings accounts is that the minimum deposits for opening an account are often much higher than the protection offered by the local compensation scheme.
For instance, according to the latest expat savings rates <link to article 1185>, to get the best rates from Santander, such as the 1.25% fixed two year bond, the minimum amount on deposit is £200,000.
None of the financial compensation schemes will cover this amount.
You can find out which UK banks are covered by the same licence on the independent financial advice web site Moneyfacts.
Don’t forget the terms and conditions of the protection schemes are reviewed and adjusted from time to time and sometimes at short notice.
