Reduction in bank deposit protection

From January 2016 the Financial Services Compensation Scheme (FSCS) is changing. Savers have one month left to adjust their bank deposits to the new limits. Here’s the updated information posted to the FSCS website posted 5 July 2015:

 “Savers are getting a new deposit guarantee limit from the New Year.

The current £85,000 level of protection continues until 31 December 2015. So there’s no immediate change for consumers. That means people with more than the new limit have six months to spread their money around to keep within it.

The new limit will be £75,000, which will protect more than 95% of all savers. The overwhelming majority of people have £50,000 or less in savings.

The change comes under the European Union Deposit Guarantee Schemes Directive. It fixes a harmonised limit of €100,000 (or the equivalent) across Europe. The new UK limit is set today. 

There’s also other good news for some consumers with higher balances. People with some types of temporary high balances will have FSCS protection up to £1m for up to six months. Things like the proceeds from a house sale qualify for the new protection limit.

Large companies and small local authorities (such as parish councils) will also benefit from FSCS protection from today. FSCS will cover them up to the new limit of £75,000.”

 Other changes include:

From 3 July 2015, depositors with temporary high balances will be covered up to £1 million for six months from the date on which the money is transferred into their account, or the date on which the depositor becomes entitled to the amount, whichever is later. This is to ensure that depositors are protected when they deposit funds over the limit as a result of specified events, including following a house sale or funds received from a ‘life event’ such as a divorce settlement or inheritance, for a period of time until they have had sufficient time to spread the risk between institutions to appropriately protect these funds.

For insurance policyholders, the Prudential Regulation Authority has changed the insurance limits for FSCS compensation to increase protection for policyholders in the event of an insurer failing. This increases the limit to 100% of cover for all long term policies, for professional indemnity insurance and claims arising from death or incapacity. This reflects the potential for significant adverse consequences to policyholders, and the wider financial system, of cover being disrupted. The limits for all other types of insurance remain the same.