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

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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.

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Paul Clitheroe AM is the founder of Money and serves as the publication's editorial adviser. One of Australia's most trusted personal finance experts, Paul has spent decades helping Australians build wealth, manage debt and make smarter money decisions. He is widely known for host­ing the Money TV program and authoring best-selling personal finance books. Since launching Money in 1999, he has played a leading role in delivering practical, independent financial guidance to Australians. Paul is chair of InvestSMART Financial Services. He was the founding chair of Ecstra Foundation, a national not-for-profit focused on improving financial wellbeing, from 2018 to 2026, and led the Australian Government's Financial Literacy Board and Financial Literacy Australia from 2004 to 2019. In academia, Paul is chair in financial literacy at Macquarie University, where he is also a Professor in the School of Business and Economics. Ask Paul your money question. Due to volume, Paul cannot respond to questions posted in the comments section.