Changes to Financial Services Compensation Scheme (FSCS)
October 29th, 2015
- From 1 January 2016, British savers will receive a lower guarantee on their deposits. At present, in the unlikely event that a UK bank or building society collapses, the Financial Services Compensation Scheme (FSCS) will pay compensation of up to £85,000 per person or small business, per authorised bank or building society. However, from the beginning of 2016, the maximum amount of compensation will be reduced from £85,000 to £75,000.
- Under the European Union’s own Deposit Guarantee Schemes Directive, a harmonised limit of €100,000 (around £73,500) is fixed across all EU member states. Because the value of the pound has increased against the euro, the sterling limit has been reduced to keep it at the harmonised level, and the Prudential Regulation Authority (PRA) is now required to review the limit every five years.
- According to the FSCS, most people have £50,000 or less in savings and therefore the new threshold will protect more than 95% of UK savers. However, those who are affected by the new rule need to take action and consider dividing their money between several banks and building societies in order to ensure their savings are fully covered.
