Business

Savings safety net: £4m ad campaign misses target

Euan Mee, the lead character in the Financial Services Compensation Scheme's (FSCS) new consumer awareness campaign.
Image caption Euan Mee was the lead character in the FSCS publicity campaign

Public awareness of the UK savings safety net has failed to increase - despite a £4m advertising campaign.

Mark Neale, chief executive of the Financial Services Compensation Scheme (FSCS), told the BBC that a rethink was needed on explaining saver protection.

The FSCS guarantees up to £85,000 of deposits per saver, per authorised institution if a bank or building society goes bust.

Protection was strengthened following the Northern Rock saga.

US example

Television advertising coincided with the increase in the safety limit from £50,000 to £85,000 at the start of 2011.

However, Mr Neale told the BBC News website that research had shown very little change in how much people knew of the safety net before and after the three-month campaign.

"It did not shift awareness anything like what we were hoping for or expected," Mr Neale said.

He concluded that general advertising was not the way to engage with the public on the issue. Instead, he hoped to see more prominence for the protection scheme in bank branches, on material about financial services, and on websites - when people were signing up to financial products.

He pointed to the example of the US, where the equivalent protection scheme's logo is a regular feature in bank branches and literature.

Paying for risk

Mr Neale was speaking shortly after the City watchdog said it was restarting the funding review of the FSCS, which had been put on hold for 12 months following announcements of regulatory changes.

At the start of 2012, the Financial Services Authority (FSA) will consult on the levies charged to different financial institutions to fund the scheme.

Some smaller institutions have called for the banks that have been most at risk of failure to be charged more than those that have played safer.

Mr Neale told the BBC that the proposal was "well worth looking at".

Image caption The protection limit increased at the start of 2011

It comes after a busy year for the FSCS.

Claims for compensation from those who had savings or investments with collapsed financial businesses rose by 25% to 39,500 in 2010-11.

The scheme paid out £535m, driven partly by the failure of investment firm Keydata and as a result of payment protection insurance claims.

The FSCS has a target of paying compensation to depositors when a bank, building society or credit union goes bust within seven days, although the legal requirement is within 20 working days.

Mr Neale said that, this year, the majority of payouts had been made in just a few days.

The FSCS was established nearly 10 years ago but, he said, had become especially relevant during the financial crisis.

"The events of 2007-08 underlined the need for a compensation scheme and the need for one that is capable of rising to the challenge," he said.

"It is a message of reassurance that protection exists, and the great majority of people need not worry."

However, he added that consumers should be aware that pre-paid cards are not covered by the FSCS, so people would not automatically be refunded any money on those cards if an organisation went bust.

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