Keeping your money safe

Paul Bonetti

Private Client Adviser, Brighton

Following the collapse in March in the US of Silicon Valley Bank and Signature Bank, together with the forced merger of the significant European global institution Credit Suisse with UBS, there were concerns over the risks of another global financial crisis and the protection given to bank deposits. However relevant authorities acted quickly to provide reassurance to depositors that their monies were safe.

Here in the UK, financial protection is also provided to customers of financial services firms, through the Financial Services Compensation Scheme (FSCS).

What is the FSCS?

The FSCS was set up by Parliament under the Financial Services and Markets Act 2000, and can pay you compensation when authorised financial services firms go out of business.  It is a completely independent and free to use service, and paid for by firms who are authorised by the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA).

What protection does the FSCS provide?

The FSCS covers a number of financial products, including pensions, investments, bank and building society accounts, mortgages and insurance.

The maximum amount of compensation from banks and building societies is £85,000 per eligible person, per bank, building society or credit union. This limit applies across all accounts held with the financial services firm, where the account is held in the individual’s name or where they are listed as the beneficial owner. If the money is held in a joint account, each account holder is protected up to £85,000 across all accounts held (£170,000 total). If you have larger cash savings with one bank or building society, you should also consider whether to spread your savings across a number of firms in order to maximise your protection under the FSCS.

Investments and pensions are covered under different aspects of the FSCS. For example, long term insurance contracts, annuities and certain personal pensions are covered for 100% of the value without any upper limit. Investments (such as ISAs and General Investment Accounts) are generally covered for up to £85,000 per provider.

UK banking sector shows resilience

The Bank of England’s Financial Policy Committee (FPC) aims to ensure the UK has a stable financial system, through identifying vulnerabilities and putting in place measures that build resilience. This means that households and businesses can make payments, manage their savings, borrow money and be protected against risks.

The events in March were monitored closely by the FPC, particularly their potential impact on UK banks and financial stability. The FPC has confirmed that the regulations in place for UK banks mean that they have significant financial resources to absorb shocks. Furthermore, UK bank profits are currently healthy and have no significant exposures to banks which have failed or are in trouble.

The FPC’s judgement supports the view that there isn’t currently a risk of contagion in the UK financial system and explains why we do not believe we are on the cusp of another financial crisis.

Looking out for our clients

Many people rely on high-quality financial advice to preserve and grow their long-term savings and investments. As well as being trained in providing the best financial advice possible, Origen’s advisers are trained to identify anything that could potentially cause financial harm to our clients.

We have chosen to restrict the products that we advise on to those that we feel offer the most financial protection to our customers. We won’t recommend unregulated products that we consider carry too much risk or have a lack of liquidity. We won’t recommend unregulated collective schemes or investment trusts.

Any advice or recommendations we provide will be based on your stated objectives, level of risk and any restrictions that you wish to place on the type of investments, markets or products you would be willing to consider. We are not tied to any product providers when assessing which product is most suitable for your needs.

It is important to regularly review your financial plans to make sure they continue to meet your financial objectives, desired level of risk and provide the appropriate financial protection for your needs. If you would like further information or financial advice, please speak to your Origen adviser.


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