At the end of January the amount of savings that the Financial Services Compensation Scheme (FSCS) guarantees in the event a bank or building society goes under was raised from £75,000 to £85,000.
However, many high street banks are yet to update their websites and in-branch literature with the new information, potentially providing wrong information to customers about the level of protection available.
The banks aren't breaking any rules, though, as they have until 30 June 2017 to update their communications – five months after the change.
The issue was something loveMONEY.com journalist Reena Sewraz noticed when trying to open a joint bank account in a bank branch last week.
"My partner and I were shown a video which, among other things, mentioned the FSCS protection on deposits and stated it was £75,000, or £150,000 for joint account holders," she said.
"As a financial journalist writing about these things every other day I knew straight away that was the wrong figure, but my partner who doesn’t was none the wiser and accepted the message without a second thought.
And it’s not just a problem with videos, signs and literature in branch that may take a long time to overhaul and update. Some banks haven’t updated their websites with the new information either, which should be a much simpler process."
We found Halifax, Lloyds, Barclays, HSBC, First Direct, M&S Bank and Tesco Bank had information on FSCS protection but had the old £75,000 limit stated or just not stated at all.
The screen grab below shows the out-of-date message on the Halifax site.
Santander, NatWest, Royal Bank of Scotland, Co-operative Bank and Nationwide have made changes to their sites, while TSB and Bank of Scotland used a link to the FSCS compensation page to ensure information customers get is up to date.
Not breaking the rules
The Prudential Regulation Authority (PRA), part of the Bank of England, is responsible for setting out the timeline for banks to comply with changes to FSCS protection.
Its guidance gives banks until June 30 to update their communications. So banks with this out of date information aren't actually breaking any rules.
Is the out of date information harmful?
Since the deposit limit has increased by £10,000, banks and building societies aren’t really putting any savings at risk by not having up to date literature and messages in-branch and on their website.
However, savers may want to take advantage of the £10,000 increase in protection and could be missing a trick because they assume the limit hasn’t changed.
The only potential for real harm would be if the savings protection limit had decreased.
The last time the FSCS deposit limit fell was on July 3 2015 when it went from £85,000 to £75,000. However, banks were given a shorter two-month grace period to get their communications up to date.
The Prudential Regulation Authority guidance at the time stated that firms must “amend the posters and stickers that firms are required to display in branches and on websites to reflect the new limit. This must be done by firms as soon as practicable and in any event by September 1 2015 latest.”
However, savers thankfully hand a six-month grace period up to December 31 2015 where the £85,000 limit applied so had enough time to move their money even if they hadn’t received up to date information.
Why the FSCS is important to understand
The amount of savings protected by the FSCS should a financial firm collapse is £85,000 per person per institution and deposits that exceed this limit aren’t guaranteed should your bank fail.
Crucially, the limit only applies per banking licence, rather than by bank. So you are only covered for £85,000 worth of savings across HSBS, First Direct and M&S Bank.
Therefore it’s important to be aware of the savings protection limit so you can move your money if it falls outside of the threshold.