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Whether you're just starting your financial journey or looking to take your money management skills to the next level, the Pennies to Pounds Podcast is your go-to resource for financial education and empowerment.
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Is your money protected? In this week's episode, we're joined by Matt Phillips, Head of Readiness at the Financial Services Compensation Scheme (FSCS). Matt discusses how FSCS works and its vital role in protecting your finances when UK banks and institutions fail. From bank deposits to investments, pensions, mortgages, and insurance, learn how to secure up to £85,000 in compensation in the unlikely event of a firm's collapse.
Hey guys and welcome back to the Penny to Pounds podcast with your host, kia, and this is a podcast where we aim to dispel your myths, simplify difficult financial jargon and rectify your own personal problems. Happy Monday, everyone. I hope you've had an amazing weekend. Now I've got an amazing episode for you. Today we're talking all about protection for your money. This is really crucial and you probably have the protection, but you don't know that you have it. So, to explain it further, I've got an amazing guest with me. Guest, who are you?
Speaker 2:
My name is Matt Phillips and I'm the Head of Readiness at Financial Services Compensation Scheme.
Speaker 1:
I'm really excited and I've been waiting for this episode because I really want to delve deeper into it. So I'm going to ask you what is FSCS and what role does it play in protecting consumer finances?
Speaker 2:
So FSCS was set up in 2001 and it's independent of the government. It's independent of the financial services industry we're free to use and our purpose really is to protect customers of financial services firms that have failed.
Speaker 1:
I think it's really important because a lot of people don't know.
Speaker 2:
They may have seen the logo, but they have no idea. So how does FSCS actually work? £85,000 protection per individual, and we also offer a much broader range of coverage than just deposits. So we also protect pension products, investments, financial advice, mortgages, insurance and more recently we started protecting debt management claims and funeral plans as well. As part of that, the key really is to be protected by FSCS. The firms that fail need to be UK authorised and regulated by the PRA, which is Potential Regulation Authority, or the FCA, which is Financial Conduct Authority.
Speaker 1:
I think that's a really crucial part, especially when you said a protection up to 85 000 pounds. So what does that actually mean for people at home? Is that money in their bank accounts? Is that investments? Obviously, you mentioned a range of product products. Sorry, but what does that?
Speaker 2:
actually mean. So it can mean a range of things really. So obviously, in terms of bank accounts it it's coverage up to 85 000 pounds. So if you're lucky enough in your bank to have £85,000, if your bank was to fail and it was regulated, then you could be protected up to that amount with FSCS For financial advice, investments, pension products, there's also protection there with that. So we do have that limit of up to £85,000.
Speaker 2:
But our process works in slightly different ways depending on the product that you have. So, for example, if a bank were to fail, then we wouldn't really need customers to interact with us. Necessarily. We would process those claims within seven days. We might make payment through check. So the first a customer might hear is they get checked with the post and that has the compensation that they're due the money that is in their bank account of that failed firm. We've also introduced a digital payment portal recently. So if there are enough email addresses that a firm can provide that's failed, then potentially we may contact people by email to say you can make a payment to another account that you hold directly For our investment, pension, mortgage or financial advice claims.
Speaker 2:
It's a little bit different, so customers would need to go through our claims assessment process. So submit a application form, submit evidence of what's happened so we can make an assessment on eligibility and work out how much that customer may be owed. And then separately on insurance. What we try and do in the first instance is to transfer the policy that the customer has, so to try and minimise disruption or harm to that customer the fact they had that policy. We would try and find another one so they don't see any of that disruption. If we're not able to do that, we would work out what policy percentage of their premiums they may be owed back and we would refund them that so they can find alternative cover that's really good, I think, especially the fact that you've broken it down, that there's coverage everywhere.
Speaker 1:
But I know that a lot of people listening and watching are going to wonder am I protected? So how can people go and check or figure out before they take out a product if that protection is in place for them?
Speaker 2:
so people can go to our website and we have a protection tool on there so people can interact with that, put in names of firms. There's also the FCA register as well. So if you go on the FCA's website that will tell you if a firm is regulated and authorised to carry out certain activities and by checking both of those sources you can get that comfort that you are protected when you're taking these products out. And if the worst were to happen which we hope it never does, but there is that protection behind you if that were to happen.
Speaker 1:
I think it's great to know. I know I've spoken to a lot of young people especially and they've been very sceptical about the new modern digital banks and protection that they get with that, just because they might hear from their parents. You know, brick and mortar is better. You can walk into a store and a lot of the digital banks don't have that. But making sure that FSCS is there before you take out any kind of products with these institutions is very crucial, and making sure that they're FCA registered, like you said two crucial components. So I completely agree with you FSCS is great.
Speaker 2:
It offers so much protection for people and their finances. So I want to ask you and sort of residual trauma that people have got around when things can go wrong, and I think ultimately we have found time and time again from research that we've carried out that the number one driver of trust within the UK financial sector is consumer protection.
Speaker 2:
Most recent research has shown that 63% of people that we asked said having a consumer protection scheme increased their confidence in the financial sector and I think you know as much as we may want to have a thriving economy and you know people talk about growth and talk about expansion. I think without a high level of trust in the industry it's very hard to build that sustainably. So I think fscs plays a really key role in influencing trust and we do a lot of work through our communications and marketing teams to make sure we're reaching out to people. So we have a pensions awareness campaign at the moment and we see the majority of harm that we see tends to be with pensioners at the moment or people submitting pensions claims. So we're targeting our communications and our advertisements around that demographic to try and increase that awareness, build some trust there so they know we're there, they know how to interact with us but also they're going through the right steps to make sure that where they are interacting with the industry they're doing it in a way that means they're protected absolutely.
Speaker 1:
It's so crucial and, like I said, pensions is a massive one. There's a lot of things going around. There's a lot more scams going on. Especially so it is so important to be protected, and I'm glad that fscS is doing the education that is needed and reaching out to people because it is very important, which is why this podcast is also here as well. We are seeing the fintech landscape expand and evolve, and I'm sure we haven't even scratched the surface of what that's going to look like. How is FSCS adapting to the evolving landscape? Because obviously, as we know, we've had the brick and mortar banks. I remember when I got my first bank account, I pretty much went with. My dad had it because it's just an established bank. But we are seeing more of these digital banks come and fintech is only just going to be a growing space. So how is FSCS evolving with that?
Speaker 2:
It's a really good question and you know the pace of change is ever increasing. So we particularly around that. That move, I suppose, is most noticeable around the traditional banking practices and where people are interacting much more with digital products or new products to market that help people to interact differently with their money, potentially help them to interact more quickly with their money and in a more interactive way with their, with their friends or with their family. So we we maintain really close working relationships with the regulators, so the pra and f and FCA, who I mentioned before, and that enables us to stay at the forefront of what's happening in relation to a regulatory stance so policy changes or potential areas of focus or where there might be issues that they're potentially concerned around and helps us to make sure that we're prepared for those changes as they may be coming in. Separately to that, we also work very closely with firms themselves and trade bodies, so it's a really good way for us to understand the feelings of those firms and areas themselves.
Speaker 2:
Obviously, regulator interaction gives you one view. Working with the firms and the trade bodies that are operating within that industry gives you a view of what they're seeing, how their customers are behaving in certain environments. How are their new products working? So, particularly on that innovation space, what are these new products, how do they work, how are businesses operating them and what are they doing with, say, the data for it? So we can get that understanding to make sure that our processes and our systems remain up to date and appropriate, so that, if the worst does happen, we're then able to respond as quickly and efficiently as we can.
Speaker 2:
And then, lastly, we we actually carry out reviews of firm data. So, for example, in my area we carry out reviews of deposit takers data, so banks, building societies, credit unions and we do this to try and understand the quality of the data that those firms hold. So these firms may be offering traditional products, may be offering new, innovative products, or it may be a mix, and that enables us to get a view of potential issues within systems or quality issues and then report back to the regulators so we can work with the firms to fix those while they're live and they're operational, rather than if the worst were to happen and then there's harm and disruption to to customers. So we try and approach it in a range of ways to make sure that we're maintaining pace with change within the industry.
Speaker 1:
I think that's amazing. I don't think I've heard it that often from institutions who work that hard to move with the industry. I think a lot of people and a lot of firms are kind of like used to the way that they do things, but things are moving. So it is very comforting and I think it does go back to that point of consumer trust. I think it does feel consumers of trust knowing that they are protected and knowing that fses is doing everything that they can to make sure that they're staying up to date with the changes, which I think is amazing. What would be three things, then, that you'd like people listening and watching to know when it comes to FSCS and the protection that they get?
Speaker 2:
Three key takeaways I would say to make sure number one that your financial products, your services are FSCS protected. So checking our website to make sure, checking the FCA register to make sure that the firms are authorised. Secondly, fscs can only step in if a firm has failed. So it's probably a key point to make that we wouldn't step in in relation to a firm that's still live and is still operating with its customers and providing those products. If a firm is live, customers need to contact that firm if they've got a problem or if there's a complaint or if that's not satisfactory, contact the financial ombudsman service and they can help to deal with that. And then, thirdly, if the worst has happened and a regulated firm has failed, fscs may be able to step in and provide compensation and protection up to 85 000 pounds. So for a joint account, it would be for each individual on that account, so each person would be entitled to £85,000.
Speaker 1:
Amazing. Well, this has been such an insightful episode because, like I said, fscs is a great protection scheme for consumers and their money, but a lot of people just don't know how it works. They have no idea how it works and if they're protected. So, for everyone listening and watching, if you want to go and double check before you take out any products or any products you really have, the links will be in the episode description so you can go and have a look for fscs on the website and the fca register so you can make sure you are fully, fully protected. But for everyone listening and watching, where can they find out more about fscs and learn more?
Speaker 2:
So if you go to our website, so fscsorguk, and alternatively type us into Google, same with FCA. So if you want to check the register, go and have a look on Google, type in FCA register and that will bring up the results there.
Speaker 1:
Amazing. Thank you so much for joining us on the podcast and to everyone listening and watching. We're back again next week with
