The Financial Services Compensation Scheme has announced that the protection limit for savers will increase from £50,000 to the sterling equivalent of €100,000 in January 2011.
Under the Financial Services Compensation Scheme (FSCS) UK depositors are currently protected to £50,000 worth of savings per UK regulated institution. This means if your bank fails, up to £50,000 of your money is safe – £100,000 for joint accounts.
However, European legislation has now been passed which has prompted the FSCS to increase the limit to the sterling equivalent of €100,000 on 1 January 2011.
Because the limit has been set in Euros, the exact amount in British Pounds is not yet known. The Financial Services Authority (FSA) will decide on an exchange rate which will determine the amount of savings protection in the UK. The limit will be fixed and will not fluctuate as the pound varies against the euro. If fixed today the compensation level would be approximately £85,000. The FSA plans to issue a consultation in October.
The extent to which people are protected against the failure of financial companies became a matter of huge concern during the credit crunch as high street institutions such as Northern Rock, HBOS and Lloyds TSB teetered on the brink. The collapse of investment firms such as Keydata has heightened the public’s concern.
The news from the FSCS entirely refutes recent media speculation that the government is planning to reduce the compensation amount as part of its austerity measures.
For more information on the role of the FSCS and the extent to which your savings and investments are protected their website is an excellent resource.