The Guernsey Banking Deposit Compensation Scheme How does this protect RATS and IPP members’?
The Guernsey Banking Deposit Compensation Scheme (GBDC) has been in force since November 2008. It was designed to offer protection for anyone depositing money with Guernsey Licensed Banks, no matter where in the world they might be based. Protecting retail depositors is the scheme’s main focus. For IPP and RATS members, there are some key points to note.
How does it work?
In the event that a bank covered by the scheme fails, it is declared in default by the Guernsey Financial Services Commission. Compensation is then available to Qualifying Claimants who held deposits with the bank. The scheme is funded via annual charges that are paid by Guernsey’s banks. If a bank does fail then additional charges are applied.
RATS members'
The list of Qualifying Claimants includes the trustees of a Guernsey Retirement Annuity Trust Scheme (RATS). So, the Scheme protection applies to members of bespoke RATS, multi member RATS and occupational schemes. Qualifying Recognised Overseas Pension Schemes (QROPS) and Qualifying Non-UK Pension Schemes (QNUPS), established and approved as a Retirement Annuity Trust Scheme, are also covered. Each sub pension is protected up to £50,000 each.
IPP members'
The Scheme does not apply to members of 40 (o) or 40 (ee) International Pension Plans (IPP’s), as the legislation only extends to ‘Retirement Annuity Trust Schemes’ established and approved by the Guernsey Income Tax Office.
What impact does this have?
Excluding International Pension Plans or other types of retirement plans from the Scheme’s protection should not in reality create a problem for those using these plans. As these plans are normally fully invested- the risk of a bank defaulting, and a member of an IPP losing money, is small. In the event of a default, there would be other remedies available to International Pension Plan members.
Key features of the GBDC Scheme
- All 'qualifying deposits' are covered (mainly those from personal retail depositors).
- There are no residency requirements – depositors are covered wherever in the world they live.
- The Scheme only covers banks licensed by Guernsey Financial Services Commission.
- It is operated by an independent statutory Board which is separate from both the Guernsey Financial Services Commission and the States of Guernsey.
- The compensation timeline is: payment within three months of the bank’s failure.
- The compensation cap per qualifying deposit in respect of the failing bank is £50,000.
- Multiple accounts at the same bank are covered, but only up to a total of £50,000.
- There is an overall compensation cap of £100 million in a five year period. This cap also means that compensation in respect of any one bank cannot exceed this figure.
- Where the total compensation cap is exceeded, compensation is reduced pro rata.
