Will the Financial Services Compensation Scheme protect my savings?
I’m worried that the total is above the £75,000 covered under the Financial Services Compensation Scheme (FSCS). I’ve been told that they count as two separate accounts, so I can have up to £75,000 in each. Is that correct?
"The FSCS pays compensation to consumers who suffer a loss when financial services firms, authorised by the Prudential Regulation Authority or Financial Conduct Authority, are declared in default and unable to pay claims against them.
Aviva is a member of the FSCS and so claims against the insurer should be covered by the scheme.
The compensation limits vary depending on the type of financial product you hold. When you refer to £75,000, this relates to the new limit for deposit accounts (reduced from £85,000 from 1 January 2016). This is a limit per person with each deposit-taking organisation. So it wouldn’t matter if you had several accounts with the same bank or building society, what would matter is the total value of those accounts.
This £75,000 limit would apply for cash Isas, but FSCS protection is different for pensions and stocks and shares Isas.
Personal pensions are often thought of as investment products. In reality, if your pension is directly managed by Aviva it is likely to fall under the long-term insurance category. This means that the FSCS would provide protection of 100% of the claim, with no upper limit.
If your pension is invested with third-party investment managers and they are in default, then it could be covered under the investments category instead, in which case the FSCS would provide protection of up to £50,000 per person per firm. You can clarify this with Aviva to see which category your pension sits in.
Stocks and shares Isas would be treated as investments and so the compensation limit of £50,000 per person per firm would apply."
Read our article How stocks and shares Isas work for more info.
Patrick Connolly is a certified financial planner for Chase de Vere.
The Financial Services Compensation Scheme is the compensation fund of last resort for customers of authorised financial services firms. If a firm becomes insolvent or ceases trading, the FSCS may be able to pay compensation to its customers. Limits apply to how much compensation the FSCS is able to pay, and those limits vary between different types of financial products. However, to qualify for compensation, the firm you were dealing with must be authorised by the Financial Services Authority (FSA).
This is a mutual organisation owned by its members and not by shareholders. These societies offer a range of financial services but have historically concentrated on taking deposits from savers and lending the money to borrowers as mortgages, hence the name. In the mid-1990s many societies “demutualised” and became banks. One academic study (Heffernan, 2003) found demutualised societies’ pricing on deposits and mortgages was more favourable to shareholders than to customers, with the remaining mutual building societies offering consistently better rates. In 1900, there were 2,286 building societies in the UK; in 2011, there are just 51.