Savings protection set to be restored to £85,000

22 November 2016
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The savings protection limit could be increased from £75,000 to £85,000 if a proposal from the Bank of England gets the green light.

In a consultation the Bank of England suggests the limit should be raised on 30 January 2017, although firms would have six months to amend and update their systems.

 

At the moment, deposits worth up to £75,000 with an individual bank are protected by the Financial Services Compensation Scheme.  This limit was based on a sterling equivalent of  €100,000 on July 3rd 2015.  At the time the exchange rate was €1.3992.

However, as of 1 July 2016, the value of the pound had slumped to €1.1909. This is a 14% change, that merits a limit of £85,000, according to the Bank.

Under current rules the Prudential Regulatory Authority must review the savings limit every five years. This means it is not due to be reviewed until July 2020. However, it does have the power to bring forward reviews in the event of unforeseen events such as major currency fluctuations.

 

Commenting on the consultation, Danny Cox, a chartered financial planner at Hargreaves Lansdown says:  “Setting the level of deposit protection for UK savers based on the exchange rate from a foreign currency on a seemingly random date has never made much sense. We know from the popularity of NS&I products how important the security of money is and resetting the FSCS limit back to £85,000 sets a more positive tone for savers.”

 

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