Business

The year when you knew your money was safe

The Italian Government has been working out plans for a €20 billion rescue of the country’s most troubled banks including Monte dei Paschi di Siena
The Italian Government has been working out plans for a €20 billion rescue of the country’s most troubled banks including Monte dei Paschi di Siena The Italian Government has been working out plans for a €20 billion rescue of the country’s most troubled banks including Monte dei Paschi di Siena

Phew! Christmas is over and the New Year is about to kick in. And we hope you enjoyed the party.

That was quite a year for all sorts of reasons, some of which we’ve discussed at length in previous articles: Brexit, Trump and the growing squeeze on household finances with the end of year inflation rise, to name three elements that have combined to create a tumultuous year.

Christmas and the festive period is a time to sit back and reflect on what has gone on over the previous 12 months.

During 2016 there were 10 major changes to personal finance - tax returns going digital; savers’ deposit protection curtailed; incentives for green households cut; stamp duty rises for buyers of second properties; personal savings allowance introduced; new dividend taxation regime begins; the new single rate pension became payable; investing got cheaper; and the ‘Innovative Finance’ ISA was launched.

We’re just going to focus on one of those changes in this article to assess the potential impact.

The initiative launch that gave us greatest concern was the news that savers’ deposit protection was to be curtailed.

The gist of the announcement is that the Financial Services Compensation Scheme (FSCS) would protect savings of £75,000, or £150,000 if held in a joint account, should the bank or building society go bust.

If you’re a couple, you had to split the money equally by December 31 2015 to ensure it was all protected.

Following the collapse of Northern Rock in 2007, along with those familiar pictures of customers queuing outside branches attempting to get their money, the then Labour Government was forced to act to protect deposits.

The scheme is now likely to rise to £85,000 due to the fall in the value of the pound following the Brexit referendum result as the cover afforded to investors must match the EU protection scheme of €100,000.

However, you only have to think about the Royal Bank of Scotland failing the Bank of England stress test at the end of November and wonder if there are a few banking surprises that could test the deposit protection process.

Consider also Italy, where in the week before Christmas, the Italian Government was working out plans for a potential €20 billion rescue of the country’s most troubled banks.

This includes the world’s oldest bank, Monte dei Paschi di Siena (MPS), which has less than 10 days to secure around €5bn in private funding before the Government intervenes.

We’re sure there are plenty of savers in Italy hoping that their deposits are protected.

It’s also worth remembering that your cover of £75,000 is per license, so if you have an investment with HSBC and another with First Direct, for example, you wouldn’t have protection with both as they are part of the same group.

So with the news that 2017 is not going to bring the roses that 2016 failed to deliver, think about taking independent financial advice to make sure your savings are fully covered should anything happen to the bank and building society you are with.

:: Darren McKeever (dmckeever@wwfp.net) is Northern Ireland adviser of Worldwide Financial Planning, which is authorised and regulated by the Financial Conduct Authority. For a free, no obligation initial chat about your individual finances, call 028 6863 2692, email info@wwfp.net or click on www.wwfp.net. Follow us on Twitter: @WorldwideFP.