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Will my home sale proceeds be protected in my bank account?

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<span>Photograph: Kathy deWitt/Alamy</span>
Photograph: Kathy deWitt/Alamy

Q I wonder if you can help me. I will shortly receive the proceeds from the sale of a second home and am concerned that the funds will not be protected when they reach my bank account. The conveyancer will only deposit the funds in one account and it may take time to divvy up and send the money to different accounts. Could you offer any advice please?

A If the sale proceeds are more than £85,000, the amount over that limit will not be covered by the Financial Services Compensation Scheme (FSCS), which protects deposits held in a bank, building society or credit union account should the financial institution go under. However, if the proceeds had come from the sale of your main residence, you would have got the benefit of the protection of what the FSCS calls “temporary high balances”. This extends FSCS protection to up to £1m for six months and it applies not only to money from the sale of a home but also to other life events that can create large sums such as a payout for voluntary or compulsory redundancy, a divorce settlement or an inheritance, among others.

It may be time-consuming but if you want to ensure that all your money is FSCS protected, you will need to divide the sale proceeds by 85,000 and use the result to determine how many savings accounts you need to open. To allow for interest possibly taking your savings over the £85,000 limit at each institution, I suggest that you put £80,000 into each account rather than the full £85,000.

It is also worth checking that you don’t have more than £85,000 in accounts within a banking group that holds the “deposit-taking licence”. That’s because the FSCS protection is limited to £85,000 a licence not per branded account. So, for example, if you have more than one account with banks that are part of Lloyds Banking Group – which includes the Bank of Scotland (which holds the licence), Birmingham Midshires, Halifax and Intelligent Finance – protection will be limited to £85,000 across all the accounts. The same is true of other members of Lloyds Banking Group – Cheltenham & Gloucester, Lloyds Bank Private Banking and Scottish Widows Bank – which all operate under the licence held by Lloyds Bank. Yes, it is confusing but you can find out more on Moneyfacts’ who owns whom? page.

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