Over the 18 years since its inception, the Financial Services Compensation Scheme (FSCS) has helped more than 4 million people, paying out more than £26 billion.
Beefed up after the financial crisis in the late 2000s, the scheme offers vital protection to savers in the event of financial institutions failing. Savers are protected up to £85,000 per ‘banking licence’ meaning that you’ll typically be compensated for the first £85,000 of your savings if a bank or other financial institution goes bust.
However, there’s an additional clause which could see you receive significantly more compensation in specific circumstances. However, this protection is so little-known that the writer of recent BBC drama Years and Years missed it entirely, creating rather a big plot hole. (A warning: there are some mild Years and Years spoilers ahead if you’re not yet up to date with the series).
‘The man who lost £1 million’ in BBC drama
Russell T Davies’ near future drama Years and Years has recently mapped an imagined future for the UK through the eyes of a northern family. The BBC show has tackled areas including immigration, nuclear weapons and the election of a far-right government, but it’s the episode relating to a new banking crisis that got the Financial Services Compensation Scheme all wrong.
In the second episode of the series, financial adviser Steven (played by Rory Kinnear) sells his family home. We see him looking at the online balance of his bank account late one night – there’s over £1 million in the account – and watch him as he decides that he’ll leave his balance in his account before moving it the following morning.
Overnight, his bank fails. We see Steven and hundreds of other account holders massing outside the bank’s city branch, locked out of the building and unable to withdraw their money.
Later in the episode, we see a distraught Steven share the news with his family. When asked how much he lost, he admits he was covered up to £85,000 (so we assume the FSCS was still in place in the near future!) but that he lost the rest of his savings. He becomes ‘the man who lost £1 million’.
Of course, the episode is designed to showcase the personal cost of financial failure: something millions have experienced over the years since the FSCS came into existence. However, writer Davies failed to take one key pillar of the protection scheme into account: the ‘temporary high balance’ clause.
What is ‘temporary high balance’ protection?
If you hold money with a bank, building society or credit union that’s authorised in the UK, and that institution fails, the FSCS is in place to protect you. You’ll be automatically compensated:
- Up to £85,000 per eligible person, per ‘banking licence’
- Up to £170,000 for joint accounts
While the terms of the FSCS are generally well-known, there is another lesser-known facet to the scheme that can protect you up to £1 million in certain circumstances.
The FSCS protects ‘temporary high balances’ in your account in specific circumstances, and for up to six months. The protection begins on the day the temporary high balance is credited to your account, and applies in cases including:
- Property sale proceeds, or equity release from your main residence
- Compensation claims for wrongful dismissal or wrongful conviction
- Insurance policy benefits
- Personal injury compensation
- Death benefits
- Retirement benefits
- Inheritance
- Voluntary or compulsory redundancy
- Marriage/civil partnership
- Divorce or dissolution
In order to prove that there was a ‘temporary high balance’ in your account, you may have to provide evidence. This could be:
- A property sale receipt
- Death certificate
- Court orders
- A letter from your insurer confirming the payout
- A letter from your solicitor, conveyancer, mortgage provider or former employer
- HMRC records
- A will
The evidence you have to provide will depend on the nature of the claim. If you are able to provide the required evidence, the FSCS will pay you compensation within three months.
How the BBC got it wrong
The reason Steven lost his money in Years and Years is because he left the proceeds of the sale of his main residence in an account with a bank that subsequently failed.
What ought to have happened is that the FSCS ‘temporary high balance’ clause kicked in. In fact, the clause was specifically designed for precisely this type of event! He would have been able to prove the cash was from a property transaction and would have been covered under the auspices of the scheme.
Without giving too much away, this would also have had a big knock-on effect as to what happened in the rest of the six-part drama! The moral of this story is: if you’re in the position where you have a substantial balance in your account for one of the above reasons, and your bank fails, you don’t have to become the ‘person who lost £1 million’…
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