First and foremost, the answer to this question is maybe. We firmly believe that it is extremely unlikely that any major Bank, Building Society, Investment Company, or Pension and Life Assurance provider in the UK will become insolvent without the support of the Government, or one of the stronger institutions.
There is a statutory scheme called the Financial Services Compensation Scheme (FSCS) which applies to all UK based regulated financial organisations. Different levels of protection apply to different products.
The first £50,000 of all deposits in Bank and Building Society savings products per financial institution per individual is protected, providing you do not have debts, including a mortgage, with the same organisation. If you do, then your compensation will be the difference between your debt and your savings.
If your savings are held with an overseas Bank, the compensation is different, it is therefore important to assess who they are held with.
If you hold Stocks & Shares ISAs, Unit Trusts, Open Ended Investment Companies (OEICs) or Investment Companies with Variable Capital (ICVCs), the protection is the first £30,000, plus 90% of the next £20,000 (a total of £48,000).
If you hold a Pension Plan or Life Assurance policy, which includes Capital Investment Bonds, the protection is the first £2,000 fully covered, plus 90% of the remaining value with no maximum.
If in the unlikely event of your provider collapsing, it is likely to take some considerable time for your compensation to be paid from the FSCS. Our best guess (as its never happened) is it would take a minimum of a few months for your compensation to be refunded to you.
The following companies, products and assets are areas you may wish to consider investing in these uncertain times, which are perceived to be relatively risk free:
- National Savings & Investments
- Government Gilts
- Capital Investment Bonds
If you are therefore holding a significant sum within one organisation, now is an appropriate time to assess whether you are happy to retain the funds with that company or product, we can assist you in determining the most suitable alternatives.