No money is ever truly safe, no matter how savvy we think we are with it. Different circumstances such as divorce proceedings, banks collapsing and being the victim of fraud can see our finances in peril for a variety of different reasons. Whilst you will never be able to fully protect your savings, there are measures in place to help you should the worst happen.

£85,000 per financial institution

Following the pound’s post-Brexit decline the Bank of England increased the financial offering against UK-regulated institutions from £75,000 to £85,000. Essentially, if you hold a UK savings account or cash ISA in a bank, building society or credit union, you could receive £85,000 if the account fails and was covered by the FSCS. This amount is per person, per financial institution and the sum is usually received within seven working days.

Life events protection

A savings provider going bust is a nightmare scenario for their customers. Many people have lost incredible sums of money. In 2015, new rules meant that savings of up to £1 million may be protected if this situation occurred.

Extra cover can be obtained to foot ‘life events’. These ‘life events’ include redundancy, property sales, inheritances and insurance or compensation pay-outs. This gives you time to transfer funds into a new account. However, you’ll need to prove where the money came from when you claim. Furthermore, you may have to wait up to three months for any cash sums over £85,000.

Key points to remember:

  • Not all UK savings are UK-regulated
  • The amount doubles for a joint account; £170,000 protection
  • Protection is based per institution, not per account

Money not protected by the FSCS

As previously mentioned, not everyone’s cash is protected by the FSCS. Having money and accounts or investments not protected by the FSCS is completely normal too. The FSCS covers:

  • Bank and building society accounts
  • Cash in SIPP pensions
  • Cash ISAs

As can be garnered from the above, there is no way that all financial accounts can be covered by the FSCS. So, what happens if your stockbroker goes under or your financial adviser isn’t as trustworthy as first thought?

Where do investors stand?

Investments differ greatly from cash in a bank. We often forget that, when we hand money over to a bank for safe keeping, they can use it to make loans to borrowing customers. Our money is mixed up with other customers’ and, if the bank were to make an error, they could not have the funds to reimburse the cash you entrusted with them.

In contrast, an investment is a single identifiable asset linked to you. Regardless of what happens, you have ownership of the investment.

FSCS protected VS not protected

Short of putting your money under a mattress, broadly speaking your cash is not safe anywhere. Whether in a building society or high-risk investment, nobodies’ money can be deemed protected. Whilst this may sound doom and gloom for the finance sector, it is simply a reality that people have become accustomed to. People know the risks associated with different accounts and investments and, despite new rules coming in here and there, people accept that things can, and do, go wrong.

Therefore, there is no certified way of ensuring your money is safe, regardless of whether it is ‘protected’ by the FSCS or not.

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