Banking Archives - Financial Planning in Surrey

What happens if my bank goes bust?

Matt Loadwick
Nov 2025 • 3 min read

What happens if my bank goes bust?

It’s probably fair to say that consumer understanding of the banking system is varied. Many people (and I used to count myself as one of these) live their lives being under the impression that the money held in their personal bank accounts, the numbers they see on their bank statements or banking app at any one moment, represents their money alone, which is held in their separate bank account, for themselves, and themselves only.

In reality, this is not quite how it works. It is true to say that it is your money, in that it is money you are entitled to. However, what happens to your money when you deposit it with a bank is not quite the same as what some people may picture. Rather than it just sitting there waiting for you to use it, the bank keeps a small reserve and then lends out the rest to earn profit, charging interest on loans and mortgages etc. This means that there is some element of risk involved when depositing funds with a bank that probably isn’t at the forefront of our mind. This is probably because (living in the UK), we take the safety and robustness of the financial services industry as a given. All banks have safeguards in place to limit the risk of you not being able to access your money; holding reserves, managing cash flows, and borrowing if needed so that it can meet withdrawals on demand.

In the UK, authorised by the Bank of England’s regulatory arm, the Prudential Regulation Authority (PRA), there are further protections for consumers in place. For the last eight years, savers with a UK-authorised bank, building society or credit union have benefitted from a deposit protection limit of £85,000, backed by the Financial Services Compensation Scheme (FSCS). This means that if your bank went bust, the FSCS would compensate you up to the value of £85,000, typically within seven days of a bank going out of business. It should be noted that this limit is per person, so in a joint account with a married couple, for example, the protected limit would be £170,000.

A new deposit limit of £120,000 per person has just been announced, taking effect from the 1^st of December. This is a 41% increase on the current limit, and was a larger increase than was expected within the industry. At the same time, the protection on ‘temporary high balances’ – which accounts for scenarios where a customer may temporarily have a large amount land in their account following a property sale, receiving an inheritance or an insurance policy payout – will be increased from £1m to £1.4m. Temporary high balances are protected for up to six months.

Without doubt, this is good news for consumers. The chief executive of the PRA, Sam Woods, said that the new maximum limit “will help maintain the public’s confidence in the safety of their money.”

There are concurrent concerns of course that the higher deposit protection limit could encourage more wealthy consumers to cache more money in savings accounts, which is contrary to the government’s objective of encouraging people to invest in the stock market, and in British companies in particular, with the aim of boosting the economy. There may be some validity to this, but purely from the perspective of individual consumers, this increased protection should absolutely be seen as a positive move.

There is no way of holding money that is truly free of risk. Holding too much money in cash means you subject yourself to inflation risk – ie the value of your money being eroded over time. Investing in the stock market means that you subject yourself to investment risk – ie the possibility that an investment’s return will differ from its expected return, including the potential loss of some or all of your initial investment. We’re here to help you decide which risks are best for you in a way that enables you to live the life you want to lead.

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What happens if my bank goes bust?Jemima Thomas2025-11-21T16:20:23+00:00

Money & Film: Bank of Dave 2

Dominic Thomas
Feb 2025 • 2 min read

Money & Film: Bank of Dave 2

“We’re going to need a bigger boat” is a line from the 1975 film Jaws as Captain Martin Brody recovers from the shock of seeing the destructive great white shark glide past Quint’s small trawler boat (The Orca) leased to hunt and destroy the predator currently consuming the inhabitants of Amity Island.

The Loan shark is similarly as consumptive, ruining the lives of those who attempt to borrow a few hundred pounds to meet the latest small calamity for which they have no other reserves. The exorbitant interest charged and the intimidation by ‘collectors’, all result in a toxic, suffocating environment that many unsuspecting borrowers become quickly entrapped.

The Netflix platform is currently screening Bank of Dave 2 – The Loan Ranger. The film is largely a work of fiction; it’s an exaggeration, but it doesn’t detract from the central message that payday loan companies are ruining lives. However, it is far from a documentary or even a dramatisation of what happens. It is a decent, charming little film of David and Goliath and of course panders to our British support of the underdog.

Dave Fishwick (on whom the story is based) is a credit to his community and frankly I thoroughly agree with his desire to destroy companies that deliberately destroy lives. You may never have used a Pay Day loan company, many of which originate in the US, and many are or have been key sponsors of football teams, normalising the ‘service’ that they provide. He took on many of these companies, who did indeed attempt all sorts of dirty tricks to thwart his attempts to stop their practices.

There is a documentary The Loan Ranger (released on 15^th January 2025) which considers the real story that inspired the film and the misery that Dave Fishwick seeks to end. Payday loan companies will of course argue that they are providing a service to people that need it, one which traditional banks do not or will not. These are invariably short-term loans for a couple of weeks until the next payday. The interest charges are high (one has an APR of 1721%). These lenders, like all others, fall within the regulatory remit of the FCA.

The problem is that there will always be a market for people who struggle with finances and unless there is a change in circumstances, and perhaps behaviour, the likelihood of climbing out of the money trap is small at best. Whilst our clients don’t have these sorts of challenges, few people are actually terribly good at budgeting. Those with ample incomes rarely look in detail at how much they are spending, save for a few significant purchases. Having a well-managed cash system and control of your finances is crucial to your long-term financial wellbeing. To find out more about how to do this successfully, please get in contact with us.

You can see Bank of Dave 2 starring Roy Kinnear on Netflix. Here is the trailer.

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Money & Film: Bank of Dave 2Jemima Thomas2025-02-25T13:37:00+00:00

The Unspoken Cash Crisis

Dominic Thomas
Jan 2025 • 2 min read

The Unspoken Cash Crisis

There are lots of topics within the subject of a cash crisis. This could mean anything from struggling to find a bank to deposit a cheque, the growing number of retailers and businesses refusing to accept cash as a form of payment, struggling businesses, individuals, families, local authorities and national institutions. However, I’d like to turn to some rather alarming recent research about the level of savings that the general population has.

According to some recent research by a much-loved Building Society in the north east, the average adult doesn’t have much cash to fall back on in a crisis. Whilst admittedly a small survey of 1,200 adults (you’ve seen adverts for women’s products from multinationals who seem to have barely left the building to ask such small numbers of people and then claim 8/10… but I digress) only 13% had at least a month’s salary saved (in cash, not pensions or investments).

The younger members of the survey unsurprisingly fared worst with 57% of 18-25 year olds having no savings at all. The “at retirement group” aged 55-64 still had an alarming 34% without any cash savings at all.

There is, of course, multiple millions saved in bank and building society accounts. Data from the Building Society Association suggests that by the end of October 2024 there was £381,581,000,000 in Cash ISAs, but despite recent rises in interest rates, the average saver is getting a paltry 2.5% interest or 4.2% for those who have actively sought a one year fixed rate.

Today, cash management systems like Akoni, Insignis or Flagstone all offer a portal service to multiple banks and building societies, enabling you to receive very competitive rates, spread across different banks, with the added advantage of spreading your FSCS collapse insurance around without hassle.

Cash, as I have said before is always good to have. It’s there for planned projects and emergencies. There are no hard and fast rules about how much, but as a guide … 3-12 months of normal spending ought to be enough for most people who have not retired, but also allow for your projects and I’m not including your ‘saving to spend’ pots for your holidays.

Any questions, please ask.

As an aside – Accountants are currently in the throes of finalising 2023/24 tax returns and some have expressed surprise at just how much extra interest our clients have gained using cash management platforms (which, unfortunately, is subject to income tax).

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The Unspoken Cash CrisisJemima Thomas2025-01-27T13:44:00+00:00

Mixed messages of mortgage market

Dominic Thomas
March 2024 • 6 min read

Mixed message of mortgage market

I wonder if I’m exaggerating if I suggest that property is such a UK obsession that it is the political dividing point between the ‘haves’ and the ‘have nots’. Think about it – what policies are designed to protect and inflate the value of property and which are there to house people (irrespective of your political beliefs or persuasion)? The value of mortgage borrowing in the UK is now £1,657.6bn 1.1% lower than last year.

Anyway, the current Government is keen to reassure us that the UK is not really in a recession and talking about one merely leads us into one through negative talk. We know that the Chancellor considered offering guarantees to banks if they issued 99% mortgages, but this never made it into the final list of ideas, probably because most of us thought it was daft.

Meanwhile the UKs largest Building Society Nationwide (who have recently bought Virgin Money for £2.9bn) report that property prices have been rising, up 0.7% in February 2024. The average house price is now £260,420 up 1.2% over 12 months. This is in contrast to the figure that the Land Registry produce of £284,691 for December 2023.

As our office is currently based in SW20, the average price of all property in the area was £555,262 but for a detached house £1,604,983, or a semi at £884,485, a terraced house at £611,401 and a flat or maisonette at £390,792. You can search your location using the UK House Price Index here

On the other hand, reports from the Bank of England also show that mortgages in arrears (missed payments) now stands at around 13.2% of mortgages.

Comparing the last two quarters of 2023 (Q3 and Q4) isn’t really ‘fair’ as we all know that most house buying and selling is done in the summer months (Q3) not over the Michaelmas term. So in that context, the Bank reports that new mortgage commitments is down 21.2% comparing Q4 in 2023 with 2022. The value of advances is down 33.8%. In Q4 2022 £81.6bn of loans were agreed, a year later it is £54bn.

The number of First Time Buyers continues to decline, from 351,000 in 2019 to 287,000 in 2023. Affordability is the key phrase in lending these days and rising rates have evidently placed pressure on borrowers, stretching their mortgage over greater lengths to make the monthly repayments more ‘affordable’. I imagine most of us are familiar with a 25-year mortgage, but 1 in 5 (20%) first time buyers takes on a 35 year mortgage, double the number a year earlier.

“It was the same in our day”… no it was not.

You will likely have heard or thought that everyone struggles at first with a mortgage and their finances. That’s true, but it’s worse for young people these days, much worse. Admittedly everyone is different, there are enormous regional variances, but if we go with averages for the UK, here are some facts that may convince you that buying a coffee and avocado on toast really isn’t the issue. The system is broken and it is deliberately set up to favour property owners here in the UK. Most law is based around the notion of property ownership.

As is evident from the above, clearly it is not possible for someone wanting the average mortgage with the average income to afford the monthly repayments on a 25 year loan, so lenders have responded by offering longer durations. This does not address the problem, it merely keeps the system going and keeps young people in debt until they are definitely not young! Of course better mortgage rates can be found (true in both periods) and of course property prices differ as noted in my local example of an average flat in Merton being more expensive than the average UK home.

If you factor in other costs that young people have which you and I did not have in 1993, it would include student loans and auto-enrolment pensions. The latter being a very good thing, the former being a State-wide fleecing (my opinion).

Yet, I suspect that you and I are likely to presume that these same young people will be happy to do all those jobs that keep civilized life ticking along, from emptying the bins, caring for the elderly and unwell to policing our streets and running the country. I imagine that they may not be quite so enthusiastic to keep doing the work and the paying of taxes to support it.

Remortgages, which you would think should be increasing as people shop around for better rates are actually in decline from 849,000 in 2021 to 538,000 in 2023. The table below makes me wonder why on earth people are not remortgaging. I do hope that it isn’t a sense of fear. To provide a reminder let’s consider mortgages and houses in December 1993. The average property price was £54,026 (Land Registry) and the standard variable mortgage rate was about 7.9%. The average salary in 1993 was £17,784 in December 2023 it was £32,240.

Perhaps your energy costs are starting to subside, if you have a mortgage or pay rent, I am sure you will have been aware of the increases in your monthly costs, at least if you have had to renegotiate terms. Variable rates are considerably higher than they were a few years ago. There is a fair chance your mortgage is with Lloyds, Nationwide, NatWest, Santander or Barclays who account for 64% of the entire mortgage market. The top nine lenders in 2022 (out of 79) affirm Pareto’s law of having 80% of the market from 20% of the players (or less).

Anyway, in terms of your financial planning, we don’t arrange mortgages, but advise you speak to Martin and his team at London Money (see our professional contacts page). You may be concerned about your children or grandchildren getting onto the property ladder or perhaps downsizing to release equity at some point. Please ensure that you keep us up to date with any changes in your thinking about how you intend to use property in relation to your planning.

Reference: Bank of England: Mortgage and Lender Administrators Statistics 2023 Q4 (LINK HERE)

Reference: UK Finance: Household Finance Review, latest data Q4 2023 (LINK HERE)

Reference: UK Land Registry: UK House Price Index (LINK HERE)

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Mixed messages of mortgage marketJemima Thomas2025-01-28T10:04:23+00:00

Gold and the ATM give away

Dominic Thomas
July 2015 • 3 min read

Gold and the ATM give away

The continued fall in the price of gold reminded me of a 4 years ago (Gold to Go). This was a short piece about the arrival of an ATM that dispenses gold bars, rather small ones! in exchange for cash..

At the moment gold is at its lowest price in 5 years. The World Gold Council who recently issued their Q2 report, acknowledges the continued decline in the price of gold this year, but point to their belief that this is in part due to a possible increase in interest rates in the US.

Gold is really part of a defensive portfolio, not being cash, bonds or equities and an asset class that investors return to in times of uncertainty – or at least that tends to be the view based upon historical data.

I tend to take the view, from experience, that when investment advice is dispensed freely by those who clearly don’t have the qualifications to provide it, then there are serious signs of a bubble. An ATM dispensing gold at a shopping centre, placed their in July 2011… well the price of gold peaked in August 2011 $1,821 per oz. At the moment its around $1,093 per oz.

The price of gold soared from $431.65 per oz in July 2005, had a wobble from March 2008 until September 2009 as it eventually broke through $1,000 per oz, climbing further until August 2011. The price has been in decline ever since and returning to the $1,000 per oz level, (no this is not a forecast) in part reflecting a higher degree of confidence in world economies.

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I’m not sure if the ATM is still at Westfield, but a quick online search suggests that there are a few in London, largely in International foreign Banks. Being a German machine (the Gold to Go one) it is incredibly reliable and prices are updated every 10 minutes, so the vending machine may easily provide you with a different price for your gold bar in-between coffee breaks.

Anyway, just so that you know, gold is fine as an element of a portfolio, but it really should not be too significant an element. Having all your investment in one asset class is very unwise – precisely why gold is one option of many. Here is the video of the Gold to Go ATM… please do not take this as advice to use the machine or indeed to buy gold, I am merely commenting on general principles and all investments ought to be made in consideration of your own context, plans, attitude to risk and capacity for loss.

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Gold and the ATM give awayDominic2024-03-13T15:56:43+00:00