An almost perfect UK government run service? You don't hear that often! (Financial Services Compensation Scheme)

Member Name: DarkestGrey

Product:	Financial Services Compensation Scheme
Date:	15/04/09 (86 review reads)
Rating:

Advantages: Claim was easy. Once allowed to claim, only took a few days to get the money.

Disadvantages: Communication was a little lacking at times, leaving us to scour the news/forums for info.

The FSCS (Financial Services Compensation Scheme) is a goverment run system which compensates people when certain financial systems fail. These include banks which is what I claimed against. I have been told that they also insure against insurance company failures.

The service is funded by charges to the organisations that benefit from the cover.

A bank account is insured to a maximum of £50,000 however there are some anomolies in this.

My bank, IceSave collapsed in the beginning of October 2008. Although they had only been operating in the UK for a couple of years, their parent bank Lansbankinn had been operating for 123 years. IceSave were registered with the FSA (Financial Services Authority) and therefore were part of the FSCS scheme.

Unfortunately, they opted for a passport scheme which means the first £16,000 (approx) should have been covered by the Icelandic government. During disagreements on how this should be paid, the UK government decided to go ahead and refund everyone in the UK from the FSCS, claiming the rest from the Icelandics at a later date.

The 'passport' scheme did seem to add a delay to the proceedings by at least a few days. Watching the news simply showed a rift between the UK and Icelandic governments when in reality it should have been simple. The Icelandics had guaranteed the first £16,000, the British insured the rest, up to £50,000.

Perhaps it would be simpler to claim from a fully UK protected company?

Anyway, the FSCS did operate a fairly efficient operation.

First of all was the 'accelerated' payment system. This, in essense meant that you could log into your account online and make the claim there. Now, don't get your hopes up too much since the website was run and operated by the Newcastle Building Society. If it had been run by IceSave/Landsbanki staff, this accelerated system may not have been able to happen.

They chose to send two emails. The first to confirm that they had your details. This was reassuring at least.

The second email was to allow you to log on and claim your money. Only a few were sent initially - I assume to iron out any problems before sending loads out. More and more were sent by the end of 2008.

I was constantly watching my email box as I had bills to pay and had in fact tried to remove £1000 from my account the day before they collapsed.

MoneySavingExpert had many IceSave users on the forum stating when they had got their second email and how easy the claim was. Some people were clearly getting frustrated that others were getting compensation before them but that was how it was!

It would have been nice to get the second email much earlier with a date you could make your claim. 'Dear Mr/Mrs ...., you can initiate your claim on December 3rd 2008' would have made financial planning a lot easier, a lot less stress free and would have made a lot of people much happier.

From making my claim, the money was in my (linked) account within just a few days.

It was unfortunate that I had to use the FSCS in the first place, and I hope no-one reading this ever has to in the future.

The service was probably dealing with a lot of frustrated people and the lack of communication was a bit of a problem for me. They would update their website stating, "Further information will be available on the 23rd". On the 23rd (or 24th!) they would update their page at one minute to five in the evening.

Then, I imagine, they grabbed their coats, ignored the phones and ran out of the building.

This left people wondering and forums would alight with speculation of reading into what they were actually saying.

Claims went through easily in most cases, although some had to be done via a paper-based application. Their only weakness seemed to be the communication, everything else was very good.

IceSave had banks in other countries including Holland and Germany. I read that one of these countries opted for paper-based claims for everyone. Their planning was poor to the point that they even had to move office since the amount of paperwork being received was greater than the load the office floor could actually take!

So not perfect, but it seems to be better run than the other countries. Something that Britain did well then!

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A few points also:

Many people have stated to me that IceSave customers should not have been compensated at all as they were 'offshore' and you paid 'no tax' on your accounts. They were not offshore - based in London and Newcastle UK. You did pay tax on your accounts unless you had an ISA with them.

IceSave is not linked to Lansbanki Isle of Man/Guernsey/Jersey which were offshore accounts and you did not pay tax on these accounts. They were also not covered by the FSCS, so no insurance policy existed on these accounts other than the assets Landsbanki had in these durisdictions.

The passport scheme made the claim a little more complicated and there are a number of banks that still run this scheme including some big names such as ING and The Post Office (Bank of Ireland).

Summary: A service I hope you never need to use, but good to know it's there if you have to!