Here's how we make sure it's as safe as possible
We use a number of banks to spread our cash holdings across institutions. We use RBS as our main clearing bank for day to day transactions, and diversify other money across other banks. We generally hold up to 30% of cash with each bank. This should be considered as a guide, as the amount held with each bank will vary depending on the type of accounts we have access to and the ability to draw down/pay up funds.
To do this, we partner with Cashfac Technologies, a global leader in Cash Management solutions to automate and efficiently manage how money is held across banks.
The interest rate payable on the Transitions Bank Account is currently paid at 1% below the Bank of England base rate. For any period when the base rate is 1% or less, we do not pay interest. Any difference between the interest rate received by the Trustees and that credited to the Transitions Bank Account is retained towards the cost of providing our services.
Of the banks selected, one bank is based in Guernsey and therefore falls under the Guernsey Banking Deposit Compensation Scheme, rather than the FSCS. This scheme provides compensation of up to £50,000 per person per licensed bank. Even though the compensation under this scheme is lower, we find this bank to be financially strong and felt that the additional diversification would still provide better overall protection for members. It is also a bank that we expect few members will have other cash holdings with. We don’t consider banks in jurisdictions that aren’t covered by a strong compensation scheme. All of the other banks selected are covered by the FSCS.
The FSCS limit of £85,000 covers all savings each member has with that financial institution. By spreading client money across banks, the money held has a higher level of FSCS protection. For example, if a member has a cash holding of £200,000.00 with one bank, only the first £85,000 is protected. With the cash spread across banks at no more than 30%, the maximum a bank would hold is just £60,000. This means the whole fund is fully protected as the £85,000 limit is not breached.
In addition, the £85,000 compensation limit is the total of private savings (current and savings accounts as an example) and money held within the Transitions Bank Account meaning our members’ overall savings are less likely to breach the FSCS limit and should be better protected.
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