From the 1st of January 2011 the level of protection that savers will receive under the Financial Services Compensation Scheme (FSCS) will increase from the current £50,000 to £85,000.
What is the FSCS?
The FSCS is the UK's statutory fund of last resort for customers of financial services firms. This means that FSCS can pay compensation to consumers if a financial services firm is unable, or likely to be unable, to pay claims against it (fscs.org.uk). Put simply, if for example, your bank or buising society goes bust then the FSCS will pay you compensation.
Why is this happening?
A new €100,000 deposit compensation limit comes into force in all European Economic Area (EEA) member states from the 1st January 2011. £85,000 is the Sterling equivalent
Are there any other changes?
The Financial Services Authority has also announced the introduction of fast payout rules. Under these rules the majority of claimants will be compensated within seven days of making a claim, while the remainder will be compensated within 20 days. In addition, from 1st January 2011 deposits will be ring-fenced so that outstanding loans or debts are not deducted from savers' compensation if held with the same institution.
What does it mean for me?
In a nutshell greater protection should your bank or building society go bust. Under the existing rules you are protected for the first £50,000 of money held on deposit (£100,000 for a joint account) with your bank or building society. That means that should the unfortunate happen and your bank or building society goes bust then you will get back up to £50,000. From the1st January this level of compensation will rise to £85,000 on sole accounts and £170,000 on joint accounts.
For more information on protecting your savings see my posts Money tip #99 – How to protect your savings from your bank going bust.
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