FSCS cash limit coming down to £75K / new £1m temp protection

Archi_Bald

Hard to believe, but from Jan 1 2016 the FSCS limit for cash protection is coming down to £75K.

http://www.fscs.org.uk/news/2015/july/new-deposit-protection-limit-coming-on-1-january/

In slightly better news: From today, 3 July 2015, depositors with temporary high balances will be covered up to £1 million for six months from the date on which the money is transferred into their account, or the date on which the depositor becomes entitled to the amount, whichever is later. This is excellent news for people in between houses. This announcement is confirmation of an earlier Budget announcement and is buried in a PRA press release.

Rollinghome

Due to the rise in the £ against the Euro to stay in line with the European Deposit Guarantee Schemes Directive which sets the guarantee at 100,000 Euro.

Seems totally potty. I'd guess the majority of UK savers aren't too sure what the current limit is and if they're going to constantly move it up and down with currency movements, some will never know what the limit is.

jimjames

Rollinghome wrote: »

Seems totally potty. I'd guess the majority of UK savers aren't too sure what the current limit is and if they're going to constantly move it up and down with currency movements, some will never know what the limit is.

The vast majority of UK savers (maybe 85%+?) have nowhere near the limit at £85k or £75k so the numbers potentially affected will probably be relatively small.

redux

It's hard to imagine that the underwriting cost can see substantial savings.

If they wanted to look tidier with a round number, why not 100k? Which makes me wonder, is there anything about 100k Euros, and this might be related to exchange rate?

edit: oh, I see this was mentioned above while I hesitated mid-writing

edit2, and off-topic: in the same vein, pity this country can't do something about fuel prices; difference between a litre of diesel here and Belgium or France has risen from about 8 to 16 pence up towards 30 to over 40 pence

nilrem_2

I just don't see the point of reducing the amount protected. the suggestion is that it is because banks are more stable now and ones money is not at so much risk; in which case why bother reducing the limit?
How will reducing the amount make any difference to the FSCS unless they have to pay out? But if it's now less likely why change?

Have I missed something?

ColdIron

It's a bit sticky for people who have £85,000 in fixed term savings accounts that mature in 2016 or later

alanq

Archi_Bald wrote: »

Hard to believe, but from Jan 1 2016 the FSCS limit for cash protection is coming down to £75K.

"This transitional arrangement applies to depositors who were eligible for that level of compensation before 3 July 2015 and who will continue to be eligible for compensation after 3 July 2015."
http://www.fscs.org.uk/what-we-cover/questions-and-answers/qas-about-limit-changes/#question1

My reading is that the old limit will apply to existing accounts until Jan 1 2016 but any new accounts opened from today will only have £75,000 protection.

alanq

ColdIron wrote: »

It's a bit sticky for people who have £85,000 in fixed term savings accounts that mature in 2016 or later

"The PRA is consulting on rules that will require firms to allow depositors to withdraw funds from the account or accounts of their choice, including fixed-term accounts, even in circumstances where the depositor has an instant access account that could also be reduced. However, this rule will allow a depositor to make only one withdrawal without charge."
http://www.fscs.org.uk/what-we-cover/questions-and-answers/qas-about-limit-changes/#question11

Rollinghome

jimjames wrote: »

The vast majority of UK savers (maybe 85%+?) have nowhere near the limit at £85k or £75k so the numbers potentially affected will probably be relatively small.

Not sure how you've calculated your figure of 85%+ which suggests 15% of UK savers might have savings around the compensation limit. Figures from Lloyds indicated that 31% of the adult population had no savings at all so I'd be surprised if 15% of savers had near £85k.

But that's not the point. Whether saving is a minority sport or not, I should have thought there was benefit in clarity which won't be helped if the limit is put up and down as the exchange rate changes.

alanq

nilrem wrote: »

I just don't see the point of reducing the amount protected.

EU rules? The EU won't want competition between nations on the level of guarantee offered.

jimjames

nilrem wrote: »

I just don't see the point of reducing the amount protected. the suggestion is that it is because banks are more stable now and ones money is not at so much risk; in which case why bother reducing the limit?
How will reducing the amount make any difference to the FSCS unless they have to pay out? But if it's now less likely why change?

Have I missed something?

It's based on exchange rates, the limit is E100,000 so thanks to the strong pound the limit is now lower in sterling. Nothing to do with bank stability.

Rollinghome wrote: »

Not sure how you've calculated your figure of 85%+ which suggests 15% of UK savers might have savings around the compensation limit. Figures from Lloyds indicated that 31% of the adult population had no savings at all so I'd be surprised if 15% of savers had near £85k.

Purely an estimate and maybe on the high side.

If 70% of the population have nothing or under £2000 of savings that means 30% have over £2000. So I estimated half of those could have highest amounts but if numbers are skewed then it might be as low as 5% or less. Perhaps the sample here isn't representative of UK as a whole.