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

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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.


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.


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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