Most British nationals know of the Financial Services Compensation Scheme (FSCS). This consumer protection means that amounts deposited with a UK institution are insured to £85,000, per person, per organisation.
The failure of a bank or lender can be disastrous, so the coverage means that individuals don’t stand to lose all of their savings. FSCS is a UK scheme and applies to the bank, not the individual, so the cover will differ if you have any savings or assets held overseas.
Most countries have some version of this deposit protection scheme, but expats need to know whether their accounts are protected, and if so, to what extent. Here we explain how consumer insurances work in some of the most popular expat destinations to help you make informed choices about safeguarding your wealth.
UK Financial Services Compensation Scheme Deposit Protections
The FSCS applies to cash deposits made within regulated financial organisations – the caveat is that the £85,000 insurance applies per banking group.
Many of the largest banks are part of the same parent company, so your protection is limited across both accounts if you have savings with two organisations where each is a subsidiary. For example:
- Bank of Scotland owns Halifax and Saga.
- Yorkshire Bank and Virgin Money are under the Clydesdale Bank licence.
- HSBC and First Direct are branches of the same parent organisation.
- Lloyds Bank holds the licence covering itself and Cheltenham and Gloucester.
Individuals are covered up to £85,000 and up to £170,000 for a joint account, per FSCS licensee.
Temporary extensions are available if your deposits increase for a short period, such as having sold a property, received a redundancy payment or inherited cash. The FSCS will cover you for up to £1 million for six months, where you have a temporary high balance.
Protective Wealth Management for Expats in Europe
European countries offer a similar deposit guarantee scheme, designed to protect customers from losses and avoid mass withdrawals and potential economic instability were a bank to fail.
Protections available include:
- Individual insurance of €100,000, again per banking institution.
- Insurance against small and medium business pension schemes.
Individuals with a deposit in a failed bank must be repaid, up to the maximum threshold, within 20 working days, although this limit is being reduced to seven working days by 2024. If a deposit guarantee scheme can’t make a fast enough remittance within seven days, there is an emergency payment system to make interim reimbursements.
While these rules are universal across the EU banking union, the specific terms of protection may vary between banks. It is therefore strongly advised to deposit funds with a respected bank, which is registered with the appropriate deposit scheme in the relevant country.
Post-Brexit Account Changes for EU/EEA Accounts
Before the Withdrawal Agreement ended, any EU or EEA bank could trade through a UK branch, known as passporting. In essence, any savings made through a British branch were protected by the national regulatory rules in the home country of the parent bank, with compensation coverage.
Although deposit protection schemes vary, the assurance was that any savings or funds deposited in Britain were protected here or in Europe.
Passporting is no longer permitted, and so UK nationals, or expats overseas with British residency, may find that unless their bank has registered for permission to retain a UK presence, the account is no longer subject to standard protections.
Consumer Deposit Insurance in America
In the States, the comparable scheme is called the Federal Deposit Insurance Corporation (FDIC), which provides:
- $250,000 insurance per individual, per bank.
- The same limit across each account category.
Many online transfer providers and digital wallets are not necessarily FDIC insured and may fall out of the regulatory scope. Other exceptions apply to state-run and insurance banks, such as the Bank of North Dakota.
Only deposit accounts, such as savings, checking, and money market accounts are covered, including certificate of deposit or CD accounts, so non-deposit investment products are also excluded, such as:
- Life insurance policies
- Stocks
- Bonds
- Annuities
- Mutual funds
If in any doubt, the FDIC provides the BankFind Suite, where you can search by the name or location of your prospective bank to check whether they are registered.
Chase Buchanan can also recommend alternative insurances to safeguard your wealth, even when held in a non-deposit category not covered by the FDIC in the US.
Canadian Consumer Protections
The Canada Deposit Insurance Corporation (CDIC) provides a similar consumer protection scheme in Canada, limited to $100,000.
Coverage applies to:
- Savings and chequeing accounts (equivalent to a UK debit account).
- Foreign currency deposits.
- Term deposits, such as Guaranteed Investment Certificates (GICs).
If you’d like to verify whether a financial services provider in Canada is CDIC insured, you can search in the Members List.
CDIC insurance applies up to the $100,000 limit per category and per banking member, so you are protected to this value separately between:
- Retirement savings
- Property taxes for mortgaged homes
- Tax-free savings
- Savings held in trust
- Retirement income
- Joint and individual deposit accounts
Mutual funds, bonds, and stocks aren’t covered as in the US. Nor are cryptocurrencies or Exchange Traded Funds (ETFs).
Informed Wealth Management for Expats
Deposit protection may seem like an assumed safeguard, but it’s worth pointing out that limitations apply. For example, funds held across multiple banks, yet registered under the same licence, have restricted insurance protection – diversifying those assets may prove an excellent strategy should a bank fail.
As we’ve seen from past collapses of financial institutions, ensuring you deposit funds, savings and pensions with suitable insurance is a baseline advisable for every expat, regardless of where you live and how much wealth you own.
If you require any advice about assessing the insurances in place across your asset portfolio or would like to discuss options to diversify and improve your coverage, please get in touch with the Chase Buchanan team. Our global network of advisers provide in-depth knowledge about every aspect of expat financial management, with offices across Europe and in the US and Canada.