Savers with significant sums stashed away are being warned to make sure they don’t fall foul of the cut in the compensation scheme designed to cover them if their bank or building society goes under.
The Financial Services Compensation Scheme (FSCS) used to protect the first £85,000 of money held in any given financial institution. However, thanks to a European directive, the UK has had to cut that limit to £75,000 to bring it into line with the rest of the EU, where the limit is €100,000.
That means someone who had allocated their savings – including normal savings accounts, Isas and bonds – in a way that made sure they didn’t break the £85,000 limit with one institution might need to move some of their money elsewhere.
However, a study has shown that the public have a low level of awareness about the change.
“Our insight has found that more than half of savers are still unaware that their level of protection has decreased in recent days,” says Steve Gowler, of RCI Bank, which carried out the survey.
A third of those asked didn’t know what the FSCS was in the first place.
Mark Neale, chief executive of the FSCS, says 97% of people will remain fully protected under the new terms of the scheme. The previous limit protected 98% of people.
“What hasn’t changed is the service FSCS provides consumers should the worst happen to their bank, building society or credit union,” he says.
“We continue to be there for them.”
The £75,000 limit is per person, per institution, so a couple could put away £150,000 in a joint bank account and be covered completely.
However, make sure you know which brands are covered by which licences. Some “sister” brands, such as Halifax and Bank of Scotland, are covered by the same licence, which means you are protected up to a total of £75,000 across the two banks. But Royal Bank of Scotland and Natwest, which are part of the same group, have separate licences, so you could have up to £75,000 in both banks and have the entire amounts protected should those banks go under.
The FSCS has paid out more than £26bn in compensation since 2001.