With savers worried about the safety of their cash due to the eurozone crisis, Mark Neale (right), chief executive of the Financial Services Compensation Scheme, which would issue compensation if a bank went bust, says their money is 100% secure, if within its protection limit, even if a major bank failed.
The continuing debate about the future of the euro may be worrying for savers. However, the Financial Services Compensation Scheme (FSCS) protects people's savings in banks, building societies and credit unions up to our limit of £85 000 per person, and we would get that money back to savers quickly.
The FSCS provides some of the most comprehensive protection of any scheme in the world.
It safeguards people who place their money with any financial services business regulated in the UK. And it protects a wide range of financial products: investments, insurance, savings and mortgage advice and arranging.
What if a giant goes bust? Is there enough cash?
The FSCS has paid out more than £26bn and helped more than 4.5m people since 2001. We are funded by the industry, but the FSCS can borrow money from the Treasury if the compensation costs of a major failure are more than the industry can meet. That is what happened when banks failed in 2008.
So consumers can be reassured the FSCS will always have the money to pay compensation. No-one has ever lost a penny of protected deposits and no-one ever will.
The major bank failures in 2008/09 resulted in a number of improvements to the protection we provide. The £85,000 compensation limit for savings in bank, building society and credit union accounts means FSCS safeguards the overwhelming majority of people.
In fact, the limit will cover more than 98% of people. It is a personal allowance so a joint account would have protection of up to £170,000, per institution.
If a firm fails, compensation is automatic and savers do not need to claim.
How long does compensation take?
We can do this because all banks, building societies and credit unions have to provide us with information about each of their customers and balances. This enables us to pay back the majority of savers within seven days of a failure.
We aim to pay more complex claims within 20 working days.
These are not just promises; the FSCS has delivered. In 2011/12, the FSCS dealt with seven credit union failures and one bank failure. In each case we paid the majority of savers within seven days, and some even quicker.
With Southsea Mortgage and Investment Company Ltd, a Havant-based bank that failed last June, payments were sent to the vast majority of customers the day after the failure.
Isa status guarded
Savers with cash Isas will be able to keep the Isa status for their money.
The Government has announced its intention to change the rules to enable these savers to open a new Isa (or invest their compensation in an existing Isa) with another company.
The FSCS will also pay compensation to savers with fixed rate or fixed term deposits based on the balance in the account, including interest, to the date of default.
Not all banks operating in the UK are protected by the FSCS. European banks operating branches in the UK under European law are covered by the compensation scheme in that country.
The current European limit for banks is €100,000 (£81,000). Some non-European banks also have branches in the UK and consumers should check how they would be compensated in the event of the failure of such a bank (MSE insert: see our Safe Savings guide for more info).
A lot has changed since the run on Northern Rock in 2007 and the banking crisis of 2008/09.
UK consumers have some of the best protection possible for their hard-earned savings now and the FSCS will be there for them should the unthinkable happen and their bank, building society or credit union fails.
Views expressed do not necessarily reflect those of MoneySavingExpert.com.