From January next year there are some significant changes to the Financial Services Compensation Scheme (FSCS). British savers will receive a lower guarantee on their deposits.
In the unlikely event that a UK bank or building society collapses, the FSCS will pay currently pay compensation of up to £85,000 per person or small business, for each authorised bank or building society. However from the beginning of 2016, the maximum amount of compensation will be reduced to £75,000.
Furthermore the regulator is now required to review the limit every five years, meaning protection could change again in line with EU legislation and exchange rates.
Whilst 95% of UK savers are expected to be unaffected by these protection changes, 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.
It is important to remember that if you have several accounts with the same institution (or different banks or building societies that are subsidiaries of it) you will only receive the maximum amount once – per person, per institution.
There are some positive changes as FSCS protection has been expanded to include larger companies and small local authorities such as parish councils, with their cash deposits covered up to £75,000. The regulator has also altered the insurance limits for compensation under the FSCS to increase cover for some policyholders in the event that their insurer collapses, although the limits for all other kinds of insurance remain unchanged.
We have always encouraged our customers to ensure their holdings remain diversified and are protected as much as possible. If you or someone you know is unsure whether they are likely to fall foul of the new £75,000 limit then please do not hesitate to contact Platinum.