For many years most of us didn’t question the safety of our money when we paid it into a bank or building society account. It was inconceivable to us that banks and building societies could run into financial trouble themselves. The last time anything like this had happened was during the Great Depression of the 1930s.
The world financial crisis in 2008 and 2009 made us think again. Across the world banks and other financial institutions found themselves in financial difficulty and we saw governments stepping in to stop them going bust. Without this government intervention, a lot of money could have been lost and this has shaken confidence in the financial system.
The Financial Services Compensation Scheme
Safeguards were in place to protect our money before the financial crisis but in the UK the Government strengthened these in 2008 and most of us can be confident that the money we have in banks and building societies is safe. Under the Financial Services Compensation Scheme, the first £50,000 of our money is protected if our bank or building society collapses and, if we hold a joint account, £100,000 is protected. People with more money can protect their savings by dividing it up amongst different banks and building societies because under the Financial Services Compensation Scheme the first £50,000 in each bank or building society is protected, as long as they don’t share a banking licence.