Protection to increase for savers in January 2011
The protection limit for those who are lucky enough to have savings is to increase from £50,000 to the equivalent of €100,000 in January 2011.
Under the Financial Services Compensation Scheme (FSCS) people in the UK are currently entitled to £50,000 worth of protection per UK regulated institution. This means that if your bank goes bust, up to £50,000 of your money is safe – £100,000 in the case of joint accounts.
However, following European legislation, the FSCS has said that this limit will increase to the sterling equivalent of €100,000 on 1 January 2011.
The exact limit is not yet known but the FSCS has confirmed that once the Financial Services Authority decides what exchange rate is to be used, the limit will be fixed and so will change as the pound fluctuates against the euro. The FSA plans to issue a consultation in October.
The value to which people are protected against the downfall of financial companies became a matter of concern during the credit crunch as high street institutions such as Northern Rock, HBOS and Lloyds TSB were all in a precarious position and the collapse of investment firms such as Keydata has added to the public’s concern.
On the back of ‘inaccurate’ media reports suggesting that the FSCS had plans to reduce the compensation protection for investments, the FSCS has said: ‘The FSCS has no plans to reduce compensation protection for investments as suggested, nor is it able to do so. The rules that the FSCS applies when assessing clams are made by the Financial Services Authority. These include rules that set the FSCS compensation limits. The FSCS cannot depart from these rules’.
All of this is good news for those considering their estate planning and investments, whether they are small business owners, employed, self-employed or retired.