Banks providing outdated information on Financial Services Compensation Scheme savings protection

The maximum limit on UK savings protection increased from £75,000 to £85,000 in January, but banks don’t have to tell you that until the end of June! Is this harmful to savers?

The savings protection limit that the Financial Services Compensation Scheme (FSCS) guarantees increased from £75,000 to £85,000 on 30 January.

However, many banks have failed to update their websites and in-branch literature with the new information, potentially leaving customers misinformed about the level of protection available.

What’s worrying is that the banks aren't actually in the wrong, as they have  until 30 June 2017 to update their communications – five months after the change!

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Widespread problem

The issue was something I noticed when trying to open a joint bank account in branch last week.

My partner and I were shown a video which, among other things, mentioned the FSCS protection on deposits and stated it was £75,000, or £150,000 for joint account holders.

As a financial journalist writing about these things every other day I knew straight away that was the wrong figure, but my partner who doesn’t was none the wiser and accepted the message without a second thought.

And it’s not just a problem with videos, signs and literature in branch that may take a long time to overhaul and update. Some banks haven’t updated their websites with the new information either, which should be a much simpler process.

We found Halifax, Lloyds, Barclays, HSBC, First Direct, M&S Bank and Tesco Bank had information on FSCS protection but had the old £75,000 limit stated or just not stated at all.

The screen grab below shows the out-of-date message on the Halifax site.

Santander, NatWest, Royal Bank of Scotland, Co-operative Bank and Nationwide had made changes to their site, while TSB and Bank of Scotland used a link to the FSCS compensation page to ensure information customers get is up to date.

Not breaking the rules

The Prudential Regulation Authority (PRA), part of the Bank of England, is responsible for setting out the timeline for banks to comply with changes to FSCS protection.

Its guidance gives banks until 30 June 2017 to update their communications. So banks with this out of date information aren't breaking any rules.

The PRA says that all customer-facing staff should have been aware of the new limit from 30 January 2017 but it decided to take a proportionate approach to curb the cost to firms changing communications by having a five-month grace period.

Is the out of date information harmful?

Since the deposit limit has increased by £10,000, banks and building societies aren’t really putting any savings at risk by not having up to date literature and messages in-branch and on their website.

However, savers may want to take advantage of the £10,000 increase in protection and could be missing a trick because they assume the limit hasn’t changed.

The only potential for real harm would be if the savings protection limit had decreased.

The last time the FSCS deposit limit fell was on 3 July 2015 when it went from £85,000 to £75,000. However, banks were given a shorter two-month grace period to get their communications up to date.

The Prudential Regulation Authority guidance at the time stated that firms must “amend the posters and stickers that firms are required to display in branches and on websites to reflect the new limit. This must be done by firms as soon as practicable and in any event by 1 September 2015 latest.”

However, savers thankfully hand a six-month grace period up to 31 December 2015 where the £85,000 limit applied so had enough time to move their money even if they hadn’t received up to date information.

Why the FSCS is important to understand

The amount of savings protected by the FSCS should a financial firm collapse is £85,000 per person per institution so deposits that exceed this limit aren’t guaranteed.

Crucially, the limit only applies per banking licence, rather than by bank. So, you are only covered for £85,000 worth of savings across HSBC, First Direct and M&S Bank. You can read more about which banks are connected here.

So, it’s important to be aware of the savings protection limit so you can move your money if it falls outside of the threshold.

For more on the FSCS take a look at our guide: FSCS savings protection: how the UK deposit scheme works and who is covered.

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