- Savers could open fewer accounts as more cash is protected if banks fail
Savings platforms bust onto the scene in the mid-2010s, offering savers an easy way to make sure they were getting the best interest rate and manage larger sums of cash.
But they also had another key benefit, as they offered customers access to multiple Financial Services Compensation Scheme deposit protection limits all in one place.
Savings platforms enable customers to open multiple savings accounts with multiple banks and building societies, but manage them all together on the savings provider’s website.
Once they’re registered with the platform, they also don’t have to go through a full application each time they open a new account.
They are offered by the likes of stockbroking giant Hargreaves Lansdown which launched Active Savings in 2018, as well as Raisin UK and Flagstone.
This week the Prudential Regulation Authority (PRA) announced the FSCS deposit protection limit will rise to a bumper £120,000 from 1 December 2025.
Spreading risk: Savings platforms offer multiple FSCS deposit protection limits all in one place
Today, if you have one savings account – or multiple accounts with the same bank – with £85,000 stashed away, then some of your money is therefore not protected in the event that the bank goes under.
By allowing you access to more than one provider, savings platforms enable you to spread the FSCS protection across your multiple holdings.
For example, were you to save with six different banks that are all covered by the FSCS on the platform, you would be protected up to £85,000 in each account – notwithstanding any additional funds you might hold with the bank separately outside of the platform.
But from 1 December, the amount of cash that will be protected if a bank or building society goes bust will rise for the first time in eight years.
With the FSCS deposit protection limit to jump 41 per cent from its current £85,000 level to £120,000, is the appeal and necessity of a cash savings platform gone?
Anna Bowes, of financial planning firm the Private Office thinks not. She says: ‘Savings platforms absolutely are still appropriate for savers.’
‘The fact is that the new FSCS limit is good news, but the savings platform is still a really important tool for people with large amounts of money.
For savers who have to split funds across multiple providers, the new FSCS deposit protection limit of £120,000 may help cut down the number of accounts they need to open to remain FSCS safe, however.
For example, for someone currently with £340,000 would need to split this into four separate pots with different providers. With the limit increased to £120,000 they’ll only need to open three accounts.
But Ms Bowes says on average, customers have £450,000 on the Insignis savings platform.
She adds: ‘There are still a lot of people who have a lot more and savings platforms are really good for people who have a lot more cash savings.
‘So I still think that the cash savings platform is a really exciting prospect.’
There are other appeals to savings platforms apart from the FSCS protection on offer.
They offer savers ease of administration from a single login as well as savings accounts not available in the general market – Hargreaves Lansdown’s blockbuster easy-access cash Isa* offering 4.55 per cent is the latest example of this.
They also offer access to banks which are not open to direct customers.
Another draw is security in the brand that comes with savings platforms. James Blower, founder of website Savings Guru says: ‘HL was until recently a FTSE 100 company and so some savers may feel “safer” with them than savings directly with a more specialist and lesser-known lender.’
Mr Blower says: ‘These reasons are not impacted by the change so, while I don’t see the FSCS increase as positive for platforms, it isn’t a disaster for their model either and certainly isn’t the end for them.
‘Clearly the new FSCS limit will have an impact on savings platforms as those savers will need less banks to spread their money around and therefore might be less inclined to go via a platform than direct.’
SAVE MONEY, MAKE MONEY
4.56% cash Isa
4.56% cash Isa
Trading 212: 0.71% fixed 12-month bonus
Sipp cashback
Sipp cashback
£200 when you deposit or transfer £15,000
Top Isa without bonus
Top Isa without bonus
Straightforward 4.55% cash Isa with no boost
£100 cashback
£100 cashback
5% cashback on investments, up to £100
£20 gift card
£20 gift card
Hold £1,000 after three months in Plum’s cash Isa
Affiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence. Terms and conditions apply on all offers.
#Savers #protected #bank #fails.. #savings #platforms
