Even though interest rates are low and depositors get paid very little, especially if they pay tax, there are some significant advantages in deposit investments:
- Depending on the type of deposit, access to your funds if you need it.
- The Commonwealth Government Financial Claims Scheme (FCS), which aims to protect investors should a financial institution fail.
The FCS provides protection to deposit holders with Australian incorporated banks, building societies and credit unions (known as authorised deposit-taking institutions or ADIs), and general insurance policyholders and claimants, in the unlikely event that one of these financial institutions fails.
The FCS is a government-backed safety net for deposits of up to $250,000 per account holder per ADI. It also covers most general insurance policies for claims up to $5,000, with claims above $5,000 eligible if they fulfil certain criteria.
Once activated by the Australian Government, the FCS is administered by the Australian Prudential Regulation Authority (APRA).
ADIs covered under the FCS can be found here and general insurers covered under the scheme can be found here.
As a depositor, the scheme helps protect your capital. If you spread your deposits amongst institutions, especially if they are more than $250,000, you can ensure all of your deposit investments are covered by the FCS.
If you have multiple accounts at the one bank, where the bank can identify you as a full or part owner of the funds, it will aggregate those amounts under the scheme.
For more information see the APRA website.
