How much compensation will I receive if my bank or building society goes bust?

If I have money with a Financial Conduct Authority (FCA) authorised UK bank, building society or credit union that fails, I understand I will be compensated by the Financial Services Compensation Scheme (FSCS).

My question is what is covered? Is it my initial deposit, my initial deposit plus interest to date or my initial deposit plus interest to the end of the scheme’s term?

Anna Bowes
Fri, 07/10/2020 – 14:04

GG/via email

As you have pointed out, if you have savings with an FCA authorised UK bank, your savings of up to £85,000 per person, for each banking licence, will be protected should the bank fail.

Your question about what exactly will be covered is an excellent one, as, if the bank were to fail before any accrued interest has actually been added to your account or paid out to you, is that covered too?

According to the FSCS, the good news is that the answer is yes – although the bank may not have actually added the interest to your account, as they calculate it daily it is deemed to be yours and therefore would be part of the compensation, assuming the total is not greater than the FSCS compensation limit.

However, it is only the interest earned up to the date the bank goes into administration. For example, if you hold a 12-month bond and the bank failed six months into the term of your bond, you would get back your deposit plus six months’ worth of interest (assuming this totals £85,000 or less) – as opposed to all the interest you would have earned if you had been able to hold the bond for the full term.

One caveat here – deposits with some of the newer online banks, such as Revolut and Tide, are not covered by FSCS protection.

Anna Bowes is the founder and director of Savings Champion.

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