MSE News: Chancellor called to prevent 'absurd' savings protection cut

hra_2

What I meant to say is that the customer would have started to accrue interest after just one day regardless of when it was due to be paid and that ordinarily this should be covered. This accrued interest is even taken into account in the banks' ongoing records of affected deposits (8.26 in the document).

The real issue though seems to be that the £80K customer I mentioned is not allowed to withdraw any more than £5K according to the proposals (there is even an example "Person A" in para 2.3 of the consultation paper).

Archi_Bald

hra wrote: »

The real issue though seems to be that the £80K customer I mentioned is not allowed to withdraw any more than £5K according to the proposals (there is even an example "Person A" in para 2.3 of the consultation paper).

Agree, that would be a serious issue

ffacoffipawb

Archi_Bald wrote: »

Agree, that would be a serious issue

As the drop in protection is £10k, it seems reasonable to me to make the withdrawal amount up to £10k for anyone above £75k.

masonic

ffacoffipawb wrote: »

As the drop in protection is £10k, it seems reasonable to me to make the withdrawal amount up to £10k for anyone above £75k.

Yes, but said £75k should be based upon the projected maturity balance of their fixed account.

Newly_retired

If a major bank crashed and you needed to call upon the protection offered by the FSCS, you would have a lot more to worry about than the small amount over £75K that was unprotected.

masonic

Newly_retired wrote: »

If a major bank crashed and you needed to call upon the protection offered by the FSCS, you would have a lot more to worry about than the small amount over £75K that was unprotected.

That probably is the case, but not everyone has their savings in a major bank. Did you know that a number MSE regulars received FSCS compensation after a credit union collapsed just a few months ago?

hra_2

Some good news as a result of the consultation. There are several changes to the transitional arrangements including:

amending the rule to calculate the amount that can be withdrawn with reference to the estimated value at maturity less the new £75,000 coverage level, to a maximum of £10,000.

http://www.bankofengland.co.uk/pra/Documents/publications/ps/2015/ps1815.pdf

So if the example person with £80,000 has a projected maturity value of say £83,000 they would be able to withdraw £8,000 and keep all their FSCS protection. The actual rules do permit banks to allow a fixed withdrawal of £10,000 without having to calculate the exact amount if this is simpler.

The "affected persons" captured by the arrangements do also now include those presently under the new limit but with a maturity value above it.

Also helpful to see the argument that the FSCS guarantee forms part of the customer's contract. In response to banks' and trade bodies' objections over having to waive their penalties etc for these withdrawals:

The PRA consider this to be an appropriate outcome given the disruption to the basis on which contracts have been entered into...

Finally their reasons for choosing not to extend or "grandfather" the £85K guarantee for existing deposits were:

the possible different treatment of customers, the operational complexity it would create for firms, complexity in the event of a pay-out and the risk of causing confusion as to the applicable protection limit.

although apparently they could have done so within the legal framework for deposits made before 2 Jul 2014 (when the EU directive was re-cast).

LadyDee

When the next ISA date comes around, is it permitted, or even possible, to transfer the funds in one ISA into two separate ISAs with different organisations and pay in part of the 2016 allowance into one new ISA and part into the second new ISA?

masonic

LadyDee wrote: »

When the next ISA date comes around, is it permitted, or even possible, to transfer the funds in one ISA into two separate ISAs with different organisations and pay in part of the 2016 allowance into one new ISA and part into the second new ISA?

You can split the ISA into two after the end of the tax year, but you could not split your 2016/17 allowance between them, assuming both are cash ISAs.

spiffy

hra wrote: »

Some good news as a result of the consultation. There are several changes to the transitional arrangements including:
http://www.bankofengland.co.uk/pra/Documents/publications/ps/2015/ps1815.pdf

So if the example person with £80,000 has a projected maturity value of say £83,000 they would be able to withdraw £8,000 and keep all their FSCS protection. The actual rules do permit banks to allow a fixed withdrawal of £10,000 without having to calculate the exact amount if this is simpler.

The "affected persons" captured by the arrangements do also now include those presently under the new limit but with a maturity value above it.

Also helpful to see the argument that the FSCS guarantee forms part of the customer's contract. In response to banks' and trade bodies' objections over having to waive their penalties etc for these withdrawals:
Finally their reasons for choosing not to extend or "grandfather" the £85K guarantee for existing deposits were:
although apparently they could have done so within the legal framework for deposits made before 2 Jul 2014 (when the EU directive was re-cast).

Thanks for the update on this,but i am still a bit confused about the fact that if a person had £85,000 invested in a fixed term deposit and the max they are allowing to withdraw is £10,000 to bring them to £75,000 then each year the interest accrued would still bring them to be over the £75,000 Fscs Protection or is it that for these people they would close account and start again?