Do you understand the Financial Services Compensation Scheme?
The Financial Services Compensation Scheme was recently updated by the government in the wake of the Northern Rock collapse and many at the time suggested that it was inadequate. The last few days has seen more and more savers concerned that they may not have the protection they first thought through the scheme. So how does it work?
In simple terms the Financial Services Compensation Scheme will ensure that the first £35,000 you have with each separate banking institution is covered and you will be compensated in full. However, this is where it starts to get a little tricky where companies have a number of operations under different brand names. One which springs to mind is HBOS which also owns Birmingham Midshires as well as a number of other popular financial businesses.
The problem is that the £35,000 protection is limited to each banking institution so as Birmingham Midshires operates under the HBOS banner you would only have protection of £35,000 between the two operations. If you have £35,000 with HBOS you would be covered by the compensation scheme in full, but if you also had £35,000 with Birmingham Midshires then half of your funds would not be covered by the scheme.
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