FSCS vs Other Compensation Schemes: Where's Your Money Safest?

Most UK bank and building society accounts are covered by the FSCS, but not all accounts are UK-based and not all banks are UK banks. Where does this leave your savings?

Our savings comparison tables now show you which compensation scheme each account is protected by.

This means you can tell at a glance who’s looking out for your savings, how much of your money is ‘safe’, and which banks you should avoid if you have a substantial amount to lock away.

However, the offshore subsidiaries of many UK banks are covered by other protection schemes and while European banks can be FCA authorised, many will have their deposits covered elsewhere.

This makes it hard to know what protection you’d be afforded if the worst were to happen to your bank or building society.

We take a look at what some of the alternative schemes mean for your savings, and show you how to use that information to make sure your savings are safe:

Financial Services Compensation Scheme (FSCS)

The FSCS is by far the most common deposit protection scheme you’ll come across in the UK.

The total amount it covers is £85,000 per person, per FCA licensed institution (so up to £170,000 in shared accounts).

If you have less than £85,000 in savings with an FSCS protected account then you can rest assured that your money would be returned to you if your bank or building society went under.

It's when you have more than £85,000 in savings that you need to take care as it's possible that not all your money would be protected - even if you've spread it between different banks.

This is because some UK banks and building societies share an FCA licence and therefore FSCS protection.

Read our guide, Which Banks Count as One Under the FSCS? for a detailed look at which banks share an FSCS license and whether you should consider moving your money.

Protection for businesses and charities

Smaller businesses are protected up to the same amount under the FSCS, as well as some charities depending on how they are constituted.

Businesses and charities set up as limited companies must meet at least 2 of the following criteria to be able to claim FSCS protection:

• Turnover under £6.5 million

• Balance sheet worth under £3.26 million
• Fewer than 50 employees

Dutch Deposit Guarantee Scheme (DDGS)

The DDGS applies to Dutch banks based and regulated in the Netherlands including those that are FCA-authorised to trade in the UK under the ‘passport’ system – this includes Triodos Bank.

The Dutch deposit guarantee scheme protects up to €100,000 per person, per license (€200,000 in shared accounts).

However, your compensation is ‘net’ so your debts with that bank are subtracted from any compensation you would receive on your savings.

If you have a mortgage with Triodos Bank for instance, you should consider moving your savings elsewhere if you can. This would protect any future compensation you received from being used to settle the debt up front if the worst should happen.

Prior to their sale to Barclays, ING Direct UK accounts were protected by the DDGS, however they are now covered under the FSCS under the same listing as Barclays & Standard Life. This means you need to ensure that your total deposits with Barclays, Standard Life and the new Barclays Direct don't exceed £85,000 to ensure you are fully protected.

Other EU Banks

Deposit guarantee schemes will always be managed by the nation where a bank's license is held. However, EU legislation requires minimum compensation standards that each European Union country must apply; currently €100,000 per person, per license (€200,000 in shared accounts).

Isle of Man Depositor’s Compensation Scheme (IDCS)

All banks regulated in the Isle of Man subscribe to the IDCS, which guarantees the first £50,000 savings per person, per banking licence (£100,000 for shared accounts).

Like the Dutch scheme, calculations for compensation under the IDCS are ‘netted’ – so any debts or loans with that particular bank are subtracted from the compensation paid on your deposit.

Banks registered to the Isle of Man Depositor’s Compensations Scheme include Lloyds TSB Offshore, Alliance & Leicester International, Nationwide International and Natwest International.

Jersey Depositor Compensation Scheme (JDCS)

The JDCS covers all Jersey-regulated banks and offers up to £50,000 savings protection per person (£100,000 for joint accounts) per license. JDCS payments aren’t ‘netted’, but you would still need to honour any debts or repayment plans you had.

The key feature of the JDCS is that you would receive an interim payment of £5,000 that’s made within seven working days of a claim for savings compensation; this would be subtracted from the final balance which will be paid within 3 months of bank collapse.

Banks registered under the Jersey Depositor Compensation Scheme include Abbey international (Santander’s offshore bank) and Barclays Wealth.

Guernsey Banking Depositor Compensation Scheme (GBDCS)

The last of the Channel Island deposit protection schemes, the GBDCS covers the customers of Guernsey regulated banks for up to £50,000 singly, or £100,000 in a joint account.

GBDCS compensation payments are only offset against debts under certain conditions but this is still worth bearing in mind.

Guernsey registered banks include Co-operative Bank, Clydesdale Bank International and Skipton International.

How does this help?

Hopefully, this should give you that bit more information on where your funds are protected, what protection is afforded to them, and whether you need to move your money.

It pays to remember that licenses held in the Channel Islands or in Europe are independent of any UK licenses held by the same banking group.

You could, for example, save up to £85,000 FSCS guaranteed in a standard Lloyds TSB account, plus up to £50,000 IDCS protected in a Lloyds TSB Offshore account.

However, if depositor schemes are ‘netted’ then it’s usually best to make sure you save with a different bank to your loans or debts.

If you spread your savings, loans and debts across different banks and different licenses, you can make sure more of your money is protected and that the accounts offering you the best interest rates won’t jeopardise your savings.