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  • FIRST POST
    • colin79666
    • By colin79666 16th Oct 16, 4:27 PM
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    colin79666
    FSCS Limit
    • #1
    • 16th Oct 16, 4:27 PM
    FSCS Limit 16th Oct 16 at 4:27 PM
    The FSCS limit was changed at the beginning of the year as the pound was strong against the Euro. EU rules mean the government must protect deposits up to €100k and review the limit every 5 years.

    Now obviously the 5 years hasn't come round again but banks aren't looking super stable with all that is going on in the economy since the BREXIT vote and the pound has moved significantly against the euro. Based on todays exchange rate the limit would be more like £90k than the £75k it was lowered to on Jan 1st. With several bank mergers, particularly since 2008, there are fewer actually separate institutions to save with, especially for older folks who might not have access to new challenger online banks and they are precisely the group most likely to have significant savings from long term prudence or perhaps downsizing their house.

    Looking at the FSCS website there appears to be some scope for a review if there are significant events:
    The directive requires the PRA to review the limit every five years. The limit of £75,000 is unlikely to change before then, unless there are unforeseen events such as significant currency fluctuations.
    I'm sure no one would find it easy to argue we haven't had such an event in the past quarter so do you think the government are likely to step in and review the position now or ride it out while interest rates are still low and they don't have an election looming?
Page 1
    • jimjames
    • By jimjames 16th Oct 16, 4:34 PM
    • 10,847 Posts
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    jimjames
    • #2
    • 16th Oct 16, 4:34 PM
    • #2
    • 16th Oct 16, 4:34 PM
    I think it's extremely unlikely any change would be made.

    If anything the next change will be down not up as the limit came from EU so seems more likely to me that it would revert to £50k that it was before.

    The number affected is tiny in relation to the population so it's a non issue for most people who don't even have £2000 to their name.
    Remember the saying: if it looks too good to be true it almost certainly is.
    • TheShape
    • By TheShape 16th Oct 16, 4:37 PM
    • 453 Posts
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    TheShape
    • #3
    • 16th Oct 16, 4:37 PM
    • #3
    • 16th Oct 16, 4:37 PM
    I can't imagine this being a priority.

    The number of people with over £75,000 in savings is likely to be very small.

    Very easy to find two institutions if you have £75k - £150k or three if £150k to £225k.

    How many individuals have more than £225k (£450k for couples) in the bank?
    • bowlhead99
    • By bowlhead99 16th Oct 16, 5:18 PM
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    bowlhead99
    • #4
    • 16th Oct 16, 5:18 PM
    • #4
    • 16th Oct 16, 5:18 PM
    I hope it doesn't go up as I have no reason or desire to deposit more than £75k for safekeeping in any one institution, and the increased cost of funding the insurance scheme for the institutions would adversely affect the cost of, or interest rates offered on, any banking services I might like to have.
    • colsten
    • By colsten 16th Oct 16, 6:56 PM
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    colsten
    • #5
    • 16th Oct 16, 6:56 PM
    • #5
    • 16th Oct 16, 6:56 PM
    I can only see the protection limit go down in future - though not for a few years hence.
    • PeacefulWaters
    • By PeacefulWaters 16th Oct 16, 6:56 PM
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    PeacefulWaters
    • #6
    • 16th Oct 16, 6:56 PM
    • #6
    • 16th Oct 16, 6:56 PM
    I think it's extremely unlikely any change would be made.
    Originally posted by jimjames
    Possibly not, but the OP makes a great point.

    If anything the next change will be down not up as the limit came from EU so seems more likely to me that it would revert to £50k that it was before.
    The EU limit is €100,000 euros. It has been that since around 2010. The U.K. limit decreased to £75,000 because of the "strong" pound. This is due to be reviewed in 2020 but ther is a mechanism to bring that review forwards.

    The number affected is tiny in relation to the population so it's a non issue for most people who don't even have £2000 to their name.
    But it is an issue for those with £75k+.
    • Keep pedalling
    • By Keep pedalling 16th Oct 16, 7:43 PM
    • 2,166 Posts
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    Keep pedalling
    • #7
    • 16th Oct 16, 7:43 PM
    • #7
    • 16th Oct 16, 7:43 PM
    But it is an issue for those with £75k+.
    Originally posted by PeacefulWaters
    Only if they are keeping such big chunks of their savings in cash, and I don't think must of us with reasonably high levels of savings do that.
    • jimjames
    • By jimjames 16th Oct 16, 7:47 PM
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    jimjames
    • #8
    • 16th Oct 16, 7:47 PM
    • #8
    • 16th Oct 16, 7:47 PM
    The EU limit is €100,000 euros. It has been that since around 2010. The U.K. limit decreased to £75,000 because of the "strong" pound. This is due to be reviewed in 2020 but ther is a mechanism to bring that review forwards.
    .
    Originally posted by PeacefulWaters
    Some short memories! Less than 10 years ago the limit was just under £32k. The increase has been way, way more than inflation.

    At the start of the banking crisis in 2007 the maximum payout for depositors was just £31,700 per person, made up of 100% of the first £2,000 and then 90% of their next £33,000.
    In October 2007 the FSCS limit was raised to £35,000 and then again a year later to £50,000.


    http://www.bbc.co.uk/news/business-12093658
    Remember the saying: if it looks too good to be true it almost certainly is.
    • PeacefulWaters
    • By PeacefulWaters 16th Oct 16, 8:15 PM
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    PeacefulWaters
    • #9
    • 16th Oct 16, 8:15 PM
    • #9
    • 16th Oct 16, 8:15 PM
    Some short memories! Less than 10 years ago the limit was just under £32k. The increase has been way, way more than inflation.

    At the start of the banking crisis in 2007 the maximum payout for depositors was just £31,700 per person, made up of 100% of the first £2,000 and then 90% of their next £33,000.
    In October 2007 the FSCS limit was raised to £35,000 and then again a year later to £50,000.


    http://www.bbc.co.uk/news/business-12093658
    Originally posted by jimjames
    With the greatest respect, I know all that.

    But I don't see the relevance in 2016.

    The EU, the pound / euro exchange rate and Brexit are the only players I can see here.
    • jimjames
    • By jimjames 16th Oct 16, 8:55 PM
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    jimjames
    But I don't see the relevance in 2016.

    The EU, the pound / euro exchange rate and Brexit are the only players I can see here.
    Originally posted by PeacefulWaters
    That's my point and exactly why it's relevant now. If we are no longer bound by EU rules then the limit could well drop to pre-EU amount.
    Remember the saying: if it looks too good to be true it almost certainly is.
    • 2010
    • By 2010 17th Oct 16, 7:34 AM
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    2010
    If the banks were as strong as they should be, there shouldn`t be any limit on savings.

    As for the argument that very few people have above £75k in cash,if it`s that small a number it doesn`t really matter about a limit.
    • bowlhead99
    • By bowlhead99 17th Oct 16, 10:21 AM
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    bowlhead99
    If the banks were as strong as they should be, there shouldn`t be any limit on savings.
    Originally posted by 2010
    If the banks had to be so strong that they could guarantee billions for every customer, the interest rates they would offer would be even lower than the ones you routinely complain about.

    As for the argument that very few people have above £75k in cash,if it`s that small a number it doesn`t really matter about a limit.
    Very few people earn over £100k or £150k a year so by that logic you could argue there is no point having a limit on how much you can earn before losing your annual personal allowance or moving into a bigger tax band, we might as well not bother with those things.

    But there are large absolute amounts of money in that realm, just not large absolute numbers of people.

    The man on the street, making up the majority of the voting public, doesn't think someone earning £125k or £500k or £5m needs an annual personal allowance to help him afford life's necessities, so a somewhat arbitrary limit is set.

    Similarly, the man on the street does not want to pay high account fees or receive low interest rates to provide 100% guarantee of income and capital to someone who has £5m sloshing around on deposit which hasn't been spread over multiple counterparties or asset classes due to greed or laziness. So a somewhat arbitrary limit is set.
    • Malthusian
    • By Malthusian 17th Oct 16, 10:30 AM
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    Malthusian
    Unless you are absolutely loaded and £75,000 is your rainy day savings, or you expect to spend it within the next few years, holding over £75,000 in cash instead of investing it diversely is high-risk in terms of inflation risk and shortfall risk.

    £35,000 or so (excluding house sales and other temporary high balances) would be a perfectly sensible limit. The government should not be encouraging people to hoard money under the mattress.
    • Masomnia
    • By Masomnia 17th Oct 16, 10:35 AM
    • 16,375 Posts
    • 35,484 Thanks
    Masomnia
    There shouldn't be any protection, or what there should be should be minimal - ie the average balance at most.

    Savers should have to take on some risk when they choose a bank, to incentivise banks to act responsibly to attract savers. We shouldn't have the ridiculous situation like we had at the GFC where you could get 6% in an Iceland bank with no more risk than HSBC or whomever at 2%.
    “I could see that, if not actually disgruntled, he was far from being gruntled.” - P.G. Wodehouse
    • bowlhead99
    • By bowlhead99 17th Oct 16, 11:21 AM
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    bowlhead99
    Savers should have to take on some risk when they choose a bank, to incentivise banks to act responsibly to attract savers. We shouldn't have the ridiculous situation like we had at the GFC where you could get 6% in an Iceland bank with no more risk than HSBC or whomever at 2%.
    Originally posted by Masomnia

    Well, there was more risk at the Icelandic bank and it wasn't covered by FSCS, but our government was nice and helpful and bailed out the UK depositors to save those individuals a large loss of wealth and avoid a loss of confidence in banks at a time that many of them were struggling.

    After that "warning shot" which will have put the wind up some people without actually letting them suffer too badly, there has been more publicity about FSCS. Both to allow people to have confidence in saving decent chunks of money in financial institutions and not be tempted to keep it under the mattress for fear of market shocks , but also to remind you that you're only covered by the UK scheme where you see the logo and not if you are chasing high rates in dodgy overseas banks outside the scope of the scheme.

    I don't really have a problem with that approach but to avoid people thinking they can ignore the rules and keep getting bailed out, I would hope that if there was an "Iceland II", govt would not be so quick to leap to protect UK savers this time around.
    Last edited by bowlhead99; 17-10-2016 at 11:26 AM.
    • Heng Leng
    • By Heng Leng 17th Oct 16, 2:17 PM
    • 3,501 Posts
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    Heng Leng
    They simply shouldn't have repaid amounts over the then Icelandic limit.
    A haircut like savers got in Cyprus...
    • talexuser
    • By talexuser 17th Oct 16, 7:43 PM
    • 2,095 Posts
    • 1,559 Thanks
    talexuser
    They simply shouldn't have repaid amounts over the then Icelandic limit.
    A haircut like savers got in Cyprus...
    Originally posted by Heng Leng
    I agree, getting 80 or 90% back would have taught people that risk is something to be considered in future without actually making anyone destitute. Otherwise why should taxpayers shoulder the cost of meeting high risk gambles when they don't pay off? Oh... the credit crunch... the banks... doh!
    • bigadaj
    • By bigadaj 17th Oct 16, 9:05 PM
    • 7,842 Posts
    • 4,786 Thanks
    bigadaj
    I agree, getting 80 or 90% back would have taught people that risk is something to be considered in future without actually making anyone destitute. Otherwise why should taxpayers shoulder the cost of meeting high risk gambles when they don't pay off? Oh... the credit crunch... the banks... doh!
    Originally posted by talexuser
    Agree with the principle but was happy the practice was followed.

    I remember earning market beating rates with kaupthing even after they werent solvent and then getting all my money back, can't beat it.

    Has made me more wary though, can't totally recall exact amounts but think I was probably close to the limits at that time.
    • 2010
    • By 2010 18th Oct 16, 1:42 PM
    • 4,062 Posts
    • 3,271 Thanks
    2010
    The main reason for the collapse of the Icelandic banks (as if most people didn`t know) was greedy, incompetent bankers who decided to concentrate more on the investment side, trying to acheive rapid expansion and growth.

    Rings a bell, RBS,HBos etc.

    Interesting reading.

    http://www.rna.is/media/skjol/RNAvefurKafli21Enska.pdf
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