Bank staff ignorant about savings protection scheme

Bank and building society staff are struggling to get to grips with how the Financial Services Compensation Scheme works and are giving inadequate advice as a result.

Staff at the UK’s leading banks and building societies are failing to communicate basic information about the Financial Services Compensation Scheme (FSCS),  according to new research from Which?

Earlier this year the consumer group tested staff’s knowledge of the scheme, which protects UK deposits up to £85,000 per individual per authorised institution, at 13 of the UK’s biggest banks and building societies.

The researchers posed as potential new customers and asked five questions:

Q1. Which instant access savings account should I deposit £100,000 into?

Q2. What is the FSCS protection limit for deposits?

Q3. Will savings elsewhere affect the level of protection?

Q4. What happens if you have cash deposited in a joint account?

Q5. Are Cash ISAs treated the same under the FSCS as other savings products?

The results

Each of the 13 banks and building societies chosen were called on 12 times to gather a picture of staff’s general knowledge on the subject, giving each the chance to score 12 points.

Below is a tally of the results showing which bank or building society workers knew the most about the FSCS and which knew the least.

Source: Which?

* Half points were awarded if staff knew that protection could be affected but couldn’t explain why.

**Half points were awarded for those who recognised joint accounts were treated differently but couldn’t say how.

**NatWest was excluded from this question because it doesn’t share a banking authorisation.

As you can see Yorkshire Building Society had the most knowledgeable staff, achieving 88% in the testing, while HSBC’s workers were shown up to be seriously ill-informed about the scheme, scoring just 51%.

The lowest scoring banks were apologetic about the lack of understanding staff demonstrated and said training would improve in line with the research. But what were the correct answers?

A1: Warning!

The first question asked staff about the best account to deposit £100,000 into.

Shockingly none at any of the institutions warned that depositing this amount would exceed the protection on offer under the FSCS by £15,000.

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A2: £85,000 per person per authorised institution

The next question aimed to find out if staff actually knew the basics about the scheme; what are the protection limits for deposits under the FSCS?

The right answer is £85,000 per person, per authorised provider.

Staff at Yorkshire Building Society and Halifax were the only ones able to correctly answer the savings limit question all 12 times, while HSBC staff were the worst, only getting it right eight out of 12 times.

According to Which? some staff thought the limit was £50,000 (which it was prior to 2010) and several admitted they had no idea.

One Lloyds Bank employee said "It’s not something I’ve been made aware of."

And one NatWest employee got it all wrong: "They won’t do it for free. I imagine it’s like PPI. The bank wouldn’t have anything to do with anything like that."

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A3: Yes, if the provider shares PRA authorisation

Which? also asked if having savings elsewhere would affect the level of protection. This should have prompted staff to explain the per authorisation system the scheme follows.

The FSCS will protect individuals per Prudential Regulation Authority (PRA) authorisation, rather than per banking brand.

For example if you had savings held at the Co-operative Bank, Britannia and smile the total amount of protection available would be £85,000 as these brands share the same authorisation.

This is a key element of the scheme, which can catch people out, especially when associations are less well known. We’ve broken it down in Who owns your bank or building society?

But staff were really clueless about this element of the scheme; this question received the second poorest response from those tested. Santander staff answered incorrectly on every occasion while all providers scored below half marks apart from First Direct and Bank of Scotland.

Which? found that many staff thought protection was available per brand. One Lloyds employee said: "If you have money with a different bank, they most likely have their own license."

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A4: Joint accounts double protection limit

As the protection limit applies per person the compensation available under the FSCS doubles to £170,000 on joint accounts.

Staff at Yorkshire Building Society were the most clued up on this fact and got it right each of the 12 times it was tested, while staff at Britannia came a close second, getting a score of 11.5 out of 12.

First Direct and NatWest were the worst performers only answering correctly six out of 12 times.

Which? said sometimes staff just got the number wrong but others claimed joint accounts received the same level of protection as single accounts.

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A5: Yes

When staff were asked whether cash ISAs were treated the same under the FSCS as other savings accounts replies were far better.

Seven scored full marks and two managed 11 out of 12. However Barclays and HSBC still made errors with both scoring nine out 12.

Savings accounts, Cash ISAS and current account deposits are protected under the FSCS. But bear in mind the limit is calculated per authorised provider not account.

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How to make sure your money is protected

If you have a large amount of money to deposit, you can take steps to ensure it stays protected.

Spreading your cash between providers that don’t operate under the same banking licence is one way to do it. Read Who owns your bank or building society? if you aren’t sure where these connections lie.

Alternatively if you don’t want to open several accounts you should go for a Government-backed product like a National Savings & Investments (NS&I) account or Government bonds, as deposits of any size are 100% protected in a crisis.

You should also watch out for overseas banks that are not covered by the FSCS. EU-based banks for example are covered by the compensation scheme of the member state where they operate, so the rules may be different.

Also bear in mind that peer-to-peer saving platforms are not covered by the FSCS, although some have their own individual safety nets for those that deposit money.

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More on banking:

Over 600,000 switch current account in the last six months

TSB and Lloyds launch new high-interest current accounts

Clydesdale and Yorkshire Banks slash current account interest rates