Banks are failing savers who may be putting their cash at risk outside the protection of the Financial Services Compensation Scheme (FSCS), says a new report.
A secret shopper survey by consumer organisation Which? has castigated banks for not telling customers about the risks that they face when putting money into savings accounts.
The organisation called on all the leading banks inquiring about investing £100,000 cash – which is above the £85,000 safety net limit of the FSCS.
The risk is if a saver has more than £85,000 with one bank, even if spread across several accounts with different ‘brands’, they could lose the right to compensation for the excess if the bank gets into trouble.
Joint accounts are protected up to double the limit – £170,000.
Multiple brands
One key issue is some banks have multiple brands, and putting cash into the different brands increases the risk of a loss.
For instance, Lloyds Bank runs the TSB, Halifax and Birmingham Midshires among other brands, but more than £85,000 in cash or investments in accounts across each brand could mean a financial loss.
In the secret shopper exercise, £15,000 of £100,000 invested like this could be at risk.
Which? made 12 inquiries with each bank – a total of 156 calls – without any advisers warning that not all the £100,000 would be protected if the bank could not cover the deposit and the FSCS paid out.
Chief executive Richard Lloyd said: “Bank staff just do not know about the scheme and cannot give even basic information about compensation if their bank collapses.
Expats and offshore savings
“This lack of advice could lead to thousands of customers losing money.”
No bank adviser pointed out the problem without prompting and most had scant knowledge of the compensation scheme.
The researchers found that staff at the Yorkshire Building Society and The Halifax were best at explaining how the scheme worked when asked.
Expat savers are in an even worse plight as some offshore banks are part of financial compensation schemes in the jurisdiction where they are based, but the limits are lower in most than in Britain.
For instance, the Isle of Man, Jersey, Guernsey and Gibraltar are among offshore jurisdictions with financial compensation schemes, but the limit is £50,000 per saver for the Isle of Man and Channel Island schemes and 100,000 euros in Gibraltar.
