If you have more than one account with one banking group, you may get less compensation than you expect should the bank collapse.
Following my article on Monday discussing the chancellor's plan to guarantee up to £100k of our savings, a question was asked by Foolish reader Amacdo:
"If you have an account with the Halifax, Bank of Scotland and Birmingham Midshires is that one account for compensation purposes or three? They are all owned by the same outfit. This applies to other organisations as well".
As mentioned in my previous article, should a bank collapse up to £35,000 of our money is protected by the Financial Services Compensation Scheme. We would get the first £2,000 back in full, and 90% of the next £33,000. So all in all, the maximum compensation we could expect to receive would be £31,700 (although the chancellor is looking into raising this maximum to £100k).
In answer to Amacdo's question, if you had money in each of the three institutions mentioned you would be entitled to make just one claim, not three. Indeed, although we are led to believe that we can claim a maximum of £31,700 per savings account this isn't strictly true as it further depends on where your accounts are held.
Banks in the UK are regulated and authorised by the Financial Services Authority (FSA) and must hold a banking licence. However, a number of banks may use the same banking licence - for example, Halifax, Bank of Scotland and Birmingham Midshires are all registered under Bank of Scotland plc. As you can only make one claim for compensation per FSA banking licence, if you should hold accounts with all three you would unfortunately only be able to make one claim.
Interestingly, however, although Sainsbury's Bank is part of the same organisation, as it is registered as Sainsbury's Bank plc and holds its own licence, if you held money here you would be entitled to another claim.
HSBC plc
Other examples include the fact that First Direct is registered under HSBC Bank plc - so again only one claim could be made even if you held accounts with both organisations.
How do I know which banking licences my accounts use?
Well this isn't very hard to find out. The easiest way is to go to your bank's website and look at the small print at the bottom of the screen. For example, if you go to HSBC.co.uk and go to "About HSBC" it reads:
HSBC Bank plc is regulated by the Financial Services Authority and is registered in the Financial Services Authority Register.
And now if I should go to the First Direct website the small print at the bottom reads:
First Direct is a division of HSBC Bank plc
(These details should also be found on any literature supplied by your bank).
FSA Register
Alternatively, you can find all of the financial services firms regulated by the FSA by looking in its register.
Simply go to the FSA Register website, and plug in the firm's name that you're interested in (eg. Barclays Bank). It will then bring up a list of organisations containing these search words, including Barclays Bank plc - click on this.
Now, by choosing "names" from the keywords listed in red at the top of the screen you can find out the other names the company is currently known as - and included in here is Woolwich.
So if you have a good deal of cash in savings accounts, check that they aren't all operating using the same banking licence. If they are, it could be well worth spreading your risk and keeping a maximum of £35k with each group - this way you could feel safer in the knowledge that you've maximised the potential compensation you would be entitled to.
Many thanks go to Amacdo and Sunil for their posts.
More: £100k Savings Guarantee
