Would you get your money back if your bank went bust?

Savers outside Northern RockToday marks five years since the run on Northern Rock – and the official start of the global banking catastrophe that caused the 'credit crunch'.

Here, we look at how savers rights have changed since that fateful day, and what protection is now in place should a bank go bust.%VIRTUAL-SkimlinksPromo%

On September 14 2007, hoards of worried savers besieged branches of Northern Rock due to fears that the troubled bank was about to collapse.

The shocking scenes heralded the start of the recession in the UK and were quickly followed by the near-failures of high street banks such as Lloyds TSB and HBOS.
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Despite the ongoing economic problems, however, today's savers are much less worried about the banks to which they give their nest eggs going bust.

Research from the Financial Services Compensation Scheme (FSCS) indicates that two thirds - or 66% - of savers now believe that they would definitely or probably get their money back if a bank went bust.

At the other end of the scale, just 12% think that they would lose their hard-earned cash.

That is not to say that there will never be similar scenes should news of another bank teetering on the edge of collapse emerge, though.

Some 25% of the savers questioned by the FSCS researchers admitted that they would try to immediately withdraw their money from their bank if it appeared to be in trouble.

What many of them still fail to realise is that, even if a bank or building society does go under while their money is in one of its accounts, they are fully protected up to £85,000 by the FSCS.

Mark Neale, Chief Executive of FSCS, said: "The run on Northern Rock and the bank failures of 2008 are still a vivid memory for many people.

"However, the last five years there has been a significant improvement in FSCS protection for people's deposits. The limit is now £85,000 so the vast majority of people are covered."

What is the FSCS and how does it protect me?
The FSCS, which is funded by a compulsory levy paid by the financial services industry, protects consumers if banks, building societies or credit unions go bust.

It dates from 2001, since when it has helped more than 4.5 million people by paying out more than £26 billion in compensation.

However, most people were unaware of it until the credit crunch hit, at which time the maximum protection offered to any one individual was £50,000. Since then, the FSCS has raised the compensation limit to £85,000.

In the unlikely event of a bank or building society going bust, the vast majority of people would therefore get their money back in seven days.

Savers with larger amounts are advised to spread their money between a number of different account providers to ensure that no one bank or building society safeguards more than £85,000 of their money.

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Would you get your money back if your bank went bust?

More than 46,000 of 106,000 the complaints received by the FOS in the second half of last year related to payment protection insurance (PPI). And the organisation is expecting to receive a record 165,000 PPI complaints in 2012/2013.

The huge numbers are due to the PPI mis-selling scandal that should now be a thing of the past, but there is no doubt that the insurance, which can add thousands to the cost of a loan, is highly unpopular!

(Pictured: Martin Lewis after the PPI payout ruling)

Complaints about mortgages jumped by 38% in the last six months of last year, the FOS figures show, compared to an increase of just 5% in investment-related complaints.

Common gripes about mortgages include the exit penalties imposed should you want to sell up or change you mortgage before a fixed or discounted deal comes to an end, and the high arrangement fees charged by many lenders.

While there is nothing in the data released by the FOS about the number of complaints relating to savings accounts, hard-pressed savers have been struggling with low interest rates for several years now.

You can get up to 3.10% with Santander's easy-access eSaver account, but many older accounts are paying 1.00% or less and even this market-leading offer includes a 12-month bonus of 2.60% - meaning that the rate will plummet to just 0.50% after the first year.

Banks are imposing the highest authorised overdraft interest rates since records began, with today's borrowers paying an average of 19.47%, according to the Bank of England.

A typical Briton with an overdraft of £1,000 is therefore forking out around £200 in interest charges alone. Coupled with meagre returns on savings, it's enough to make your blood boil!

While authorised overdrafts may seem expensive, going into the red without permission will cost you even more due to huge penalty fees.

Barclays, for example, charges £8 (up to a maximum of £40 a day) each time that there is not enough money in your account to cover a payment.

If you need to send money abroad, the likelihood is that your bank will impose transfer charges - and offer you a poor rate of exchange. Someone transferring a five-figure sum could easily lose out by £500 or more as a result.

The good news, however, is that you can often get a better deal by using a currency specialist such as Moneycorp.

Automated telephone banking systems, not to mention call centres in far-flung parts of the world, are one of our top gripes - especially as we often encounter them when we are already calling to report a problem.

In the words of one disgruntled customer: "What is it about telephone banking that turns me into Victor Meldrew? Well, maybe it's the fourteen security questions, maybe it's the range of products that they try to push or maybe it's because I'm forced to listen to jazz funk at full volume while my phone bill soars.

"Actually though, I think it's because the people I eventually speak to rarely seem able to solve the issue I'm calling about."

The days of a personal relationship with your bank manager are long gone - for the huge majority of us at least.

When ethical Triodos Bank investigated recently why around 9 million Britons would not recommend their banks to a friend or relative, it found that almost a third felt they were not treated as individuals. Another 40%, meanwhile, were simply disappointed with the customer service they received.

When you're in a rush, the last thing you want to do is wait in a long queue at your local branch.

Researchers at consumer champion Which? recently found that most people get seen within 12 minutes, but you could have a much longer wait if you go in at a busy time. Frustrating stuff!

The Triodos Bank research also indicated that the bonus culture that ensured the bank's high-flying employees received large salaries, even when it was making a loss at the taxpayer's expense, was hugely unpopular with consumers.

About a quarter of those who would not recommend their current banks said this was the main reason why. And with RBS executives sharing a £785 million bonus pool despite the bank, which is 82% publicly owned, making a loss of £2 billion last year, it's not hard to see why.

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