Q I was wondering if you could help me. I will be receiving the proceeds from the sale of a second home shortly and am afraid the funds will not be safe when they arrive in my bank account. The broker will only deposit the funds into one account and it may take time to distribute and send the money to different accounts. Could you offer any advice please?
A If the sale proceeds are over £85,000, the amount over this limit will not be covered by the Financial Services Compensation Scheme (FSCS), which protects deposits held in a bank, building society or trust account. credit union in the event of the bankruptcy of the financial institution. However, if the proceeds had come from the sale of your primary residence, you would have benefited from the protection of what the FSCS calls “temporary high balances”. This extends FSCS protection up to £1million for six months and not only applies to money from the sale of a house but also other life events which can create large sums such as payment for voluntary or compulsory dismissal, divorce settlement or inheritance, among others.
It can take time, but if you want to make sure all your money is protected by the FSCS, you’ll need to divide the sale proceeds by 85,000 and use the result to determine how many savings accounts you need to open. . To allow interest to eventually take your savings beyond the £85,000 limit at each institution, I suggest putting £80,000 into each account rather than the full £85,000.
It should also be checked that you do not have more than £85,000 in accounts within a banking group holding the ‘deposit taking licence’. This is because FSCS protection is limited to £85,000 per license and not per brand account. So, for example, if you have more than one account with banks that are part of Lloyds Banking Group – which includes Bank of Scotland (which holds the licence), Birmingham Midshires, Halifax and Intelligent Finance – the protection will be limited to 85 £000. on all accounts. The same is true for the other members of the Lloyds Banking Group – Cheltenham & Gloucester, Lloyds Bank Private Banking and Scottish Widows Bank – all of which operate under the license held by Lloyds Bank. Yes, it’s confusing, but you can find out more about Moneyfacts who owns who? page.