The Financial Services Compensation Scheme’s guarantee of bank deposits has not taken responsibility away from the consumer, according to replies to a question posed by a joint committee member.
Lord Maples asked if the FSCS’s guarantee of deposits up to £85,000 undermined the principle of caveat emptor, encouraging people to chase accounts with higher returns without considering the added risk.
MoneySavingExpert founder Martin Lewis said poor financial literacy makes it hard for most people to understand the complexities behind varying returns and the knowledge that bank deposits are safe encourages people to save.
He said: “I would agree with your thesis if we had been teaching financial education in schools from five, so people had the tools in their mental arsenal to make these decisions.”
Maples cited Northern Rock as an example, saying people deposited money with the bank despite its risky business model.
Which? chief executive Peter Vicary-Smith said: “If you go into Tesco to buy a ready meal, you look at the price and think, ’Will I like the taste?’ You do not worry if it is going to poison you.”