Compensation Schemes

All deposits in UK Banks are covered by the Financial Services Compensation Scheme (FSCS), which protects the first £50,000 of each individual’s investment with that institution. Joint accounts therefore receive twice the amount.

It is important to realise that this applies per investor per institution. As many banks and building societies have merged or been taken over in recent years savers need to know who the parent company is.

However, some institutions will have more than one licence for different subsidiaries. Lloyds TSB has three core licensed banks operating on the high street, Lloyds TSB Bank, Lloyds TSB Private Banking and Lloyds TSB Scotland, plus two further licences for subsidiaries, Agricultural Mortgage Corporation Bank and Scottish Widows Bank. HBOS (which includes Halifax and Bank of Scotland) operates under one single licence, which will remain in place and separate to the Lloyds TSB licences and which includes accounts held in the following trading names and divisions: Halifax, Bank of Scotland, Birmingham Midshires, Intelligent Finance, St James's Place Bank, St James's Place Private Bank, AA and Saga.

Many non-UK banks offer comparable schemes, or operate a passport scheme in which an amount of compensation is available from the host country, topped up to the UK limit by the FSCS.

There are a couple of notable exceptions:

From midnight on the 29 September 2008 the Irish Government decided to put in place with immediate effect a guarantee arrangement to safe guard all deposits with the Irish banks and building societies. The gurantee will remain in force until midnight on the 28 September 2010 · In the UK the government owns Northern Rock and National Savings & Investments (NS&I) so deposits with either of these institutions are also 100% protected.

In September 2008, the Irish Deposit Protection Scheme was increased to €100,000 (circa £95,000 at 2 January 2009 exchange rates) per customer. Consequently, the protection received from the Irish Scheme is greater than that available under the UK Financial Services Compensation Scheme (“UK Scheme”).
Under European law, banks which have a greater level of protection in their state of incorporation are not permitted to remain a member of the UK Scheme. Consequently, Anglo Irish Bank ceased to be a member of the UK Scheme on 28 November 2008.

In the wake of recent bank collapses it has become apparent that the UK government does not intend to allow UK savers to lose their savings even if they have invested over £50,000, the current UK compensation scheme limit. For example all Bradford & Bingley savings are now 100% guaranteed by the government following its sale to Banco Santander . More recently they have announced that savers holding more than £50,000 with Icelandic bank Icesave will also be compensated in the UK. However, this cannot guarantee future actions and it is prudent therefore to spread savings between groups and to avoid exceeding compensation limits.

It is aslo worth being aware of the situation if you have savings as well as a mortgage or other debt with the same institution.

In this case amounts owed to the failed firm (for example, loans, mortgage or credit card debts) are taken into account before any compensation is paid and may be set off resulting in a lower net claim for compensation.

In the event that set off is applied, and if the borrowings exceeded the depositor's savings, there would be no overall claim against the failed firm, and the depositor would not be entitled to any compensation.

For example, if a depositor had a mortgage of £200,000 and savings of £150,000 with the same bank, set off may be applied by the Insolvency Practitioner dealing with the bank failure. As a result, the depositor may end up owing the bank £50,000, so there would be no positive balance and no claim for compensation.

However this will change from January 2010 when deposits will be ring fenced in the event that individuals have savings and loans with the same bank.  From this date savings will protected to the deposit threshold of £50,000, and will not be used to offset loans.

Below is a list of Banks regularly appearing in the best buy tables, illustrating any linked accounts and compensation schemes applicable:

Bank or Building Society	Linked Institutions	Compensation
AA	HBOS so linked with Birmingham Midshires, Saga, Bank of Scotland and Intelligent Finance	Covered up to £50,000 by UK FSCS in total.
Anglo Irish Bank	Nationalised by Irish Government wef 16 Jan '09	*100% of deposits guaranteed by Irish Government
Abbey National	Part of the Santander Group. Also includes Bradford & Bingley and Cahoot	Covered up to £50,000 by UK FSCS in total.
Alliance & Leicester	Part of the Santander Group but operating under its own banking licence	Covered up to £50,000 by UK FSCS.
Bradford & Bingley	Part of the Santander Group operating under the Abbey National licence together with Cahoot	Covered up to £50,000 by UK FSCS in total.
Brimingham Midshires	HBOS so linked with AA, Saga, Bank of Scotland and Intelligent Finance	Covered up to £50,000 by UK FSCS in total.
Cater Allen	Part of the Santander Group but operating under its own banking licence	Covered up to £50,000 by UK FSCS.
Chelsea BS	None	Covered up to £50,000 by UK FSCS
Dunbar Bank	Part of the Zurich Financial Services Group	Covered up to £50,000 by UK FSCS
Cheshire Buildling society	Owned by Nationwide so linked to Nationwide and Derbyshire Building Society	Covered by UK FSCS and entitled to seperate FSCS limit of £50,000 for each brand until 30/09/09.
First Save	First Bank of Nigeria	Very low credit rating but fully covered up to £50,000 by UK FSCS
ICICI Bank	UK arm of Indian bank	Very low credit rating but fully covered up to £50,000 by UK FSCS
ING Direct	Part of Dutch ING Group Recently bought Kaupthing Edge and Heritable Bank	Up to E100,000 protected under Dutch Deposit Guarantee sheme
Intelligent Finance	HBOS so liked with AA Saga, Bank of Scotland and Birmingham Midshires	Covered up to £50,000 by UK FSCS in total.
Investec Bank	UK arm of South African bank	Covered up to £50,000 by UK FSCS.
Kaupthing Edge	Bought by ING Group	Covered up to E100,000 under Dutch Deposit Guarantee scheme
Newcastle Building Society	None	Covered up to £50,000 by UK FSCS.
Post Office	Bank of Ireland	*100% of deposits guaranteed by Irish Government
Principality	None	Covered up to £50,000 by UK FSCS.
Royal Bank of Scotland	Direct Line	Covered up to £50,000 by UK FSCS.
SAGA	HBOS so linked with Birmingham Midshires, AA, Bank of Scotland and Intelligent Finance	Covered up to £50,000 by UK FSCS in total.
Scarborough BS	Merged with Skipton BS March 09	Covered by UK FSCS and entitled to separate FSCS limit of £50,000 for each brand until 30/09/09.
Scottish Widows Bank	Part of Lloyds TSB group but operating under its own banking licence.	Covered up to £50,000 by UK FSCS
Skipton BS	Merged with Scarborough BS March 09	Covered by UK FSCS and entitled to separate FSCS limit of £50,000 for each brand until 30/09/09.
Standard Life Bank	None	Covered up to £50,000 by UK FSCS.
Stroud & Swindon BS	None	Covered up to £50,000 by UK FSCS.
West Bromwich BS	None	Covered up to £50,000 by UK FSCS
Yorkshire BS	Merged with Barnsley Building Society Dec ’08	Covered by UK FSCS and entitled to separate FSCS limit of £50,000 for each

*From midnight on the 29 September 2008 the Irish Government has decided to put in place with immediate effect a guarantee arrangement to safe guard all deposits with the Irish banks and building societies. The Irish Government has stated that the guarantee will remain in force until midnight on the 28 September 2010. 

Last updated: 21/04/09