Savers with Cash ISAa would get their money back if their ISA proviers went under, a fact that many are not aware of.
Cash ISAs are protected under the Financial Services Compensation Scheme (FSCS) which protects insurance, investments and deposits, including ISAs.
The new compensation limit is £85,000 for deposits, up from the previous limit of £50,000.
Worryingly, according to research by the FSCS less than 50% of consumers are aware that their ISAs are protected and only 10% aware that the compensation limit has increased.
The maximum levels of compensation are:
- Deposits: £85,000 per person per firm (for claims against firms declared in default from 31 December 2010). 100% of £85,000.
- Investments: £50,000 per person per firm (for claims against firms declared in default from 1 January 2010). 100% of the first £50,000.
- Home finance (e.g. mortgage advice and arranging): £50,000 per person per firm (for claims against firms declared in default from 1 January 2010). 100% of the first £50,000.
- Insurance: 90% of the claim with no upper limit. Compulsory insurance is protected in full.
Mark Neale, Chief Executive of the FSCS, said: “The FSCS protects people who are customers of UK-authorised financial services firms. It is concerning that less than half of all adults are aware that ISAs savers are protected if their provider goes bust.
Despite low interest rates, ISAs are extremely popular products and it is important that people know their money is safe as long as it is held with an institution which is authorised by the FSA. The FSCS was set up by government to protect consumers, is independent and funded by the industry.