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Savers benefit from increased protection limit
Savers will now receive greater compensation if they lose money when their bank or building society collapses.
On 31st December 2010, the Financial Services Compensation Scheme (FSCS) increased its claims limit for deposits from £50,000 to €100,000. The FSA previously confirmed that the fixed sterling equivalent of this limit would be set at £85,000 per person, per authorised firm. However, this fixed value could be reviewed if there are large scale fluctuations in the exchange rate.
The limit was previously increased in October 2008 from £35,000 in response to the banking crisis, although savers still had to wait three months to receive their money. Now, under the new legislation, all compensation payments must be made within 20 days, and the aim is for claimants to receive their money in seven days.
Savers will also benefit from gross payouts, as any outstanding loans or debts with the same financial institution will no longer be deducted from the deposits paid out. However, the temporary rules which provided separate protection to individuals with money in two merged financial institutions have now ended.
While the FSCS covers deposits with UK banks and subsidiaries of foreign banks in the UK, deposits in branches of EEA banks within the UK will be covered by the scheme in the country where that bank is headquartered.
The FSCS will run a £4 million publicity campaign from January to March to publicise the protection available and the new limits.
