Ask Paul: Is my non-bank mortgage offset protected?


Through reading and learning from Money over the years, I've minimised interest costs by having our mortgage with a non-bank at competitive rates and an offset account.

In these uncertain times we are in, I'm worried that a non-bank is not covered by the government's deposit protection scheme. So I've moved some of the offset account money (effectively our rainy day fund) into a day-to-day account with a mainstream bank.

Am I right to worry and take this approach, or is the risk of losing access to money in an offset account with a non-bank negligible?

paul clitheroe

The key here, Martin, is "ADI". Banks, non-banks, building societies, credit unions and friendly societies can all be covered by the words "authorised deposit taking institutions".

If your non-bank or other institution is an ADI, you are covered by the Australian government financial claims scheme, meaning a guarantee over deposits of up to $250,000.

Just go to the APRA or Reserve Bank website to get a list of ADIs. It won't apply to a pawnbroker, but its cover is extensive. As a consequence, people with large amounts of money have established accounts with many ADI institutions and put $250,000 in each.

My view is that if our accounts with our major banks have no value, then things are really crook.

However, if a tiny credit union, building society or non-bank lender with ADI status is offering us a better rate, then investing up to the $250,000 guarantee with them makes a lot of sense.

In effect, any institution with ADI status has a government guarantee over deposits up to the set limit.


Paul Clitheroe AM is a respected financial adviser and Money's founder and editorial adviser. He is chair of the Australian Government Financial Literacy Board, and author of several personal finance books. Click here to email Paul your money question. Unfortunately Paul cannot respond to questions posted in the comments section.
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