The current economic climate has hit a lot of the major banks and building societies hard and it is no wonder that customers are starting to wonder just how safe their money is. Well even though there are rumours flying around about different banks going broke, your money is stiller safer in their accounts than under your mattress or floorboards.

The FSA Safety Nets

The Financial Services Authority, or FSA, authorises a scheme called the Financial Services Compensation Scheme that most of the UK’s major banks and building societies are governed by. This means that should the covered banks/building societies go bust their customers will get back any savings they had with the institution up to the value of £35,000.

This figure is per person per bank/building society so for a joint savings account the holders can claim up to £70,000 between them. Anything over this amount though is only paid at the discretion of the FSA and this is definitely a point worth considering. You can opt to save £35,000 with one bank and the rest of your saving with a second bank so you are guaranteed a full return should either institution go bust. However splitting your savings can mean you earn less interest in the long run – as a lot of banks set aside their best interest rates for major savers. Again this is a point to consider should you have more than £35,000 in savings.

Which Banks and Building Societies are Covered?

Virtually every building society is governed by the FSA and so these will be part of the compensation scheme. For a full list of banks that are covered though it is worth visiting the FSA government website. Most banks are covered however a small number aren’t.

The Exceptions

There are a couple of exceptions that should be mentioned here. The first is the National Savings & Investment Bank, also known as NS&I. This bank and all the savings and investments it holds are covered by the government and so it is classed as one of the safest places to keep your money. The other current exception is Northern Rock who has a temporary agreement with HM Treasury and so it is the Treasury who cover the savings there. This doesn’t necessarily give them the same safety measures as NS&I though as the government can withdraw their support at any time.

Quick Summary

The FSA compensation scheme will guarantee the safety of an individual’s savings up to the value of £35,000 should a bank or building society find themselves in severe financial difficulties. This means that the majority of banks and building societies are safe to save with and even in the current economic climate it would be a mistake to withdraw your nest egg and hide it in a shoebox in the wardrobe.