Are my savings safe if a bank fails?

Provided the bank you’re saving with qualifies for FSCS protection eligibility, then the FSCS will offer a guarantee on up to £120,000 of your savings (£240,000 for joint accounts), meaning there’s a safety net for savers in the unlikely event of their bank failing. The FSCS can also provide further protection if your account is holding an unusually large lump sum (up to £1.4 million) for up to 6 months.

What does the FSCS protect?

The FSCS is an institution which offers protection of up to £120,000 of your eligible savings per banking licence. This amount is increased to £240,000 for joint accounts, £120,000 per individual. This offers a degree of protection in the unlikely event that a bank fails, giving savers a safety net and allowing them to store large amounts of money while minimising the risk of potential loss.

Why do banking licences matter?

It’s worth noting that the FSCS’s limits are governed specifically by banking licences, rather than the individual banking firms themselves. That means that if two separate firms share the same banking licence, for example through a merger or shared founding, then they’ll also share the same overall £120,000 protection limit for your savings. As a result, if you’re attempting to benefit from multiple £120,000 protection limits across several providers then it can be beneficial to ensure they don’t share the same banking licence.

What if you temporarily hold a very large balance?

The FSCS has created a provision for savers who temporarily hold large balances. Unlike their usual £120,000 protection limit, a large lump sum of up to £1.4 million can be protected for a period of up to six months. This means that if a bank fails while you’re holding a large amount, such as from a house sale, redundancy payout or significant inheritance yield, then the FSCS may still be able to offer protection for that money.

What should you check before opening an account?

As a result, before opening a savings account when trying to benefit from the FSCS protection limits, it’s worth first making sure the banking institution you’re approaching is eligible for their protection. Secondly, if you wish to make use of several separate £120,000 protection limits, then it’s worth checking the separate licences of each provider to ensure they don’t share the same limit.

Are my savings safe if a bank fails?

To summarise:

• The FSCS protects eligible savings up to £120,000 per account, upped to £240,000 for joint accounts, giving savers a safety net in case a bank fails.
• This protection is offered per banking licence, meaning two banks sharing the same licence wouldn’t benefit from individual £120,000 protection limits.
• The FSCS also provides further protection for accounts briefly holding large sums, up to £1.4 million for 6 months, in cases such as a house purchase, redundancy payout or inheritance yield.

Frequently asked questions

How much of my savings is protected if a bank fails?

The FSCS will protect up to £120,000 of eligible savings if a bank fails. This is upped to £240,000 for joint accounts.

Does the highest savings rate always mean the best account?

Factors like accessibility, minimum opening amounts, maximum deposit limits, special conditions or account fees can also prove helpful when choosing a savings account which best suits your needs. The highest savings rate is just another one of these factors which is worth considering before deciding.

Are savings protected by the FSCS?

The FSCS protects eligible savings up to £120,000 per banking licence. This means that if two banks share the same licence, they’ll also share the same overall £120,000 protection total.

Can savings rates change?

Many savings accounts will have variable interest rates and are therefore subject to change. These changes are generally guided by the key rate set by the Bank of England to control inflation, so keeping informed on the key rate can be helpful.

Where can I check current tax or ISA rules?

You can review current and upcoming tax and ISA rules on the UK government website: GOV.UK - Tax on savings interest

How often should I review my savings?

Reviewing your savings every 3 to 6 months can be a good way to ensure you’re still receiving competitive interest rates, as well as to revisit your personal savings goals to make sure your plans align with your financial future.

Next steps

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