With the collapse of Northern Rock, Bradford & Bingley, Icelandic banks and others now over 10 years ago, savers should still be thinking “Is my money safe?”
As your business grows, it is likely the cash you hold in the company bank account will grow too.
Any cash deposited with a bank or building society that is authorised by the Prudential Regulation Authority benefits from the Financial Services Compensation Scheme should that bank or building society ever fail. You can find out if your bank is covered here.
What is the compensation limit?
The compensation limit is £85,000 per bank or building society. If you have money in multiple accounts with banks that are part of the same banking group, they are treated as one bank. This means that the compensation limit applies to the total amount you hold across all these accounts, not to each separate account.
The limit doubles to £170,000 for joint accounts.
You also get temporary protection on high balances up to £1 million. This covers life events such as selling your home, inheritances, redundancy and insurance payouts where your cash deposits may increase. You get cover on these for six months if your bank or building society goes bust. There is more information here on what constitutes a life event.
How do I get FSCS protection?
You do not need to do anything to get this protection, you are automatically covered.
If you hold more than £85,000 with one banking group then you may want to deposit this money across different banking groups so all of your cash is protected. You may even consider splitting your cash if you hold under £85,000 as if your bank went bust your cash may be inaccessible for a period of time.
Also note that is it not only cash that is protected by the Financial Services Compensation Scheme, it can also cover things such as pensions, investments, insurance and mortgages. More information can be found on the FSCS website here.
Feel free to give one of our expert accountants a call for further advice and guidance.