Protection for savers falls to £75,000
Written on 4 January 2016
Savers have seen the amount of protection they receive if their savings provider goes bust cut by £10,000. The Financial Services Compensation Scheme (FSCS) will now only cover the first £75,000 of an individual’s savings whereas it used to cover £85,000.
The lower limit was introduced on 1 January in response to EU rules. The level of protection is reviewed every five years and is set at the sterling equivalent of 100,000 euros. As the euro has fallen in value against the pound, this has resulted in 100,000 euro now being worth around £75,000 rather than £85,000.
The old limit protected about 98% of consumers says the FSCS.
“The good news is that the new limit will protect some 97% of people, with about 93% of consumers having £50,000 or less in savings. What hasn't changed is the service FSCS provides consumers should the worst happen to their bank, building society or credit union,” said Mark Neale, FSCS Chief Executive.
How the FSCS works
If your savings provider is regulated by the Financial Conduct Authority (FCA), 100% of the first £75,000 of your savings is protected by the FSCS. This is per person and per savings institution.
You can find out if a firm is regulated by the FCA on the Financial Services Register.
If you have a joint account, each saver has £75,000 of protection. This gives you jointly a total of £150,000 of protection.
The limit applies to all your savings with a particular bank or building society regardless of how many accounts you might have. So if you have two savings accounts with a total of £100,000 in them, only £75,000 of your savings will be protected. But if these are both joint accounts, then you will have £150,000 of protection between you.
What to watch out for
It’s worth noting that if your savings provider is owned by a financial institution which has several other brands but only one banking licence, you will only receive £75,000 (£150,000 with joint accounts) of protection across all the brands. For example, the Bank of Scotland’s banking licence covers several savings providers including the Halifax and Capital Bank. If you had £60,000 savings with the Halifax and £40,000 with Capital Bank, only £75,000 of your savings would be covered by the FSCS.
To find out who a bank is owned by and whose banking licence it is covered by, visit the Prudential Regulation Authority website.
What you can do
If you have a large amount of savings (more than £75,000) in an account, consider splitting this between more than one provider and ensure that the savings providers have their own separate banking licences.
You can find out more about levels of investor protection in our How safe are your savings and investments? guide.