Savers' protection increased to £50,000

Piggy safe

British savers are now protected up to £50,000 if a British bank fails and this guarantee could be increased further still, the financial watchdog has announced today.

The Financial Services Authority (FSA) increased protection up from £35,000 in light of continuing banking uncertainty, as well as the Irish government recently upping its protection guarantee to 100%.

This increase applies from Tuesday 7 October 2008, and means customers with joint accounts will be eligible to claim up to £100,000.

Hector Sants, chief executive of the FSA, says: “There has been extensive debate about the compensation levels. In the interests of providing clarity over the minimum level for the long term we have now decided to implement the move to a £50,000 limit from Tuesday."

The change ties in with the introduction of the government’s Banking Bill in Parliament, which is due next week.

Sants adds: “In addition, the chancellor has made clear that the Authorities will do whatever is necessary to maintain financial stability and protect depositors.”

The FSA and the government are also looking at other measures, which they say will enhance “consumer confidence” in the banking sector. At the same time, both have stated that people do not need to worry about how safe their money is, as British banks are solvent.

Other potential changes to the protection limit include increasing the protection limit beyond £50,000, ensuring compensation payments could be paid-out quickly, and changing protection to per customer per brand, rather than per bank. You can find out more about the proposals here.

Adrian Coles, director-general of the Building Society Association, has welcomed the move, estimating it will mean at least 97% of building society savers are fully covered by the FSCS.

“It is good that this new limit is to be implemented so quickly," he adds. "The financial services market is changing rapidly and there is no room for ncertainty or lack of clarity for consumers."

The change means that 98% of savers are now protected by the FSCS, according to the British Bankers' Association. Previously this was 96%.


More about

Your Comments

I have 2 Halifax accounts. 1 is an ordinary savings account and the other is a cash ISA. Are they treated separatly as far as the 50k limit is concerned.

Hi F.E, I'm afraid not. The Financial Services Compensation Scheme is very clear on this point - redress if a bank fails is per customer per bank, so your two Halifax accounts would be considered together. If the total amount of money in both these accounts exceeds £50,000 then you could have a gap in your protection.

Another point worth considering is the way Halifax is licensed by the FSA - it is part of the HBOS group, which includes Birmingham Midshires, Bank of Scotland and Intelligent Finance. HBOS is licensed as one bank, therefore not only are your two Halifax accounts counted as one deposit, any money you have in any other HBOS banks will also be added to your total balance.

This might change once the HBOS takeover by Lloyds TSB completes - or alternatively, it may make matters worse if Lloyds decides to license its new enlarged banking group as one bank. We'll have to wait and see on that one.

Finally, another very important point to consider is that if a bank fails and you owe it money (through a mortgage for example) then this amount is deducted from your savings.

So, someone with a £100,000 mortgage debt with Halifax and £2,000 in savings with Birmingham Midshires might not actually see any of their savings money returned to them. I say might as, let's be honest, we've not seen the Compensation scheme tested yet (although we will soon through Icesave) so it is hard to know what exactly will happen.

Although the British government hasn't got a 100% guarantee in place for all deposits, the fact that is has guaranteed several banks (Icesave, Heritable etc) and the fact that it bailed out Bradford & Bingley suggests it has every intention to protect people in this country against a bank going bust.

Hopefully all this is hypothetical - but regardless, if your two Halifax accounts exceed £50,000 then I would suggest moving some of your money to another (non-HBOS) bank account.

If your accounts are jointly held (ie with your partner) then your combined limit doubles to £100,000.

One last point – the government is completely revising compensation rules at the moment, and these are likely to change in January. Moneywise will cover any changes as and when so do keep checking to find out how the ground lies.


i have deposits with a uk bank - in a euro account.
are my funds protected?

I have deposits that are less than £50,000 and a Mortgage with the same bank. I have also got a sizeable amount in the same bank's ISA but its a stock market one, I am currently assuming that as these are managed funds then the stock will still be there when the bank has fallen by the way-side. Cash ISA's are obviously with the bank but are Stock ISA's safe if the bank goes bust?