MSE News: Chancellor faces renewed call to prevent 'absurd' savings protection cut

Archi_Bald

masonic wrote: »

There's not much point trying to raise the savings compensation limit with one hand when, with the other hand, they are holding down the FSCS compensation limit for investments at £50,000.

Excellent point, masonic. I haven't heard Andrew Tyrie ever demanding or even suggesting an increase of the £50K, not even for inflation.

The motivation for this open letter seems very obvious.

2010

masonic wrote: »

There's not much point trying to raise the savings compensation limit with one hand when, with the other hand, they are holding down the FSCS compensation limit for investments at £50,000.

There is a big difference between people wanting a safe haven for their savings via savings accounts compared to others "gambling" with stocks and shares investments, which as the warning goes, "can go down as well as up".

Archi_Bald

2010 wrote: »

There is a big difference between people wanting a safe haven for their savings via savings accounts compared to others "gambling" with stocks and shares investments, which as the warning goes, "can go down as well as up".

You thoroughly misunderstand what the £50K protection covers. It does of course not cover any losses that investments might suffer due to normal market fluctuations.

For details, see the FSCS site: http://www.fscs.org.uk/what-we-cover/products/investments

VT82

dunstonh wrote: »

A good suggestion. 5 years is a good timescale to have an inflation increase. it is something a sensible politician should be campaigning for with the EU.

Yes, inflation should be taken into consideration. The directive is going to need to be changed at some point, because they're not going to want it to still be a limit of 100k EUR in, I dunno, 2040 are they?


So when it does get changed, which it will need to be, that would be as good an opportunity as ever to put some kind of ratchet mechanism in, to say that non-Euro levels of cover cannot go down as a result of the exchange rate resetting (subject to still being within, say, 30% of what the Euro equivalent would be).


Yes, there is the valid reason why they should try to keep it harmonised to prevent capital flight, but there's no point just plain ignoring the reasons why they should try and prevent the cover level in non-Euro countries from being reduced.

colsten

VT82 wrote: »

Yes, there is the valid reason why they should try to keep it harmonised to prevent capital flight, but there's no point just plain ignoring the reasons why they should try and prevent the cover level in non-Euro countries from being reduced.

What sort of agreed mechanism would you suggest they use to keep it harmonised to prevent capital flight? (I am using your words).

VT82

colsten wrote: »

What sort of agreed mechanism would you suggest they use to keep it harmonised to prevent capital flight? (I am using your words).

As in keep the depositor protection levels close enough to prevent capital flight due to additional FSCS levels in different countries (within 30% of the Euro amount), but with the ratchet safeguard to prevent the 'absurd' situation we are seeing now.


This would be helped by having the Euro level go up every five years in line with some measure of inflation; if the Euro level went up by 10%+ after 5 years due to inflation, once translated into sterling, it is less likely that the ratchet would need to kick in, and especially unlikely that the sterling level of cover remaining unchanged would mean the sterling cover level would be more than 30% diverged from the Euro level of cover.


All theoretical, and never going to happen, but doesn't mean that a sensible way of controlling the FSCS levels couldn't be implemented that fixed at least two issues identified.


Explaining in numbers might help, but would be a rather pointless exercised without having the ear of the European parliament, rather than a few finance geeks on the MSE message board :rotfl:

jimjames

Archi_Bald wrote: »

Excellent point, masonic. I haven't heard Andrew Tyrie ever demanding or even suggesting an increase of the £50K, not even for inflation.

The motivation for this open letter seems very obvious.

Maybe MSE should campaign for this. It's seems utterly bizarre that the limit for savings is £75/85k yet for investments is 30% lower. Why isn't there a clamour for that to be raised to £75k?

Thrugelmir

jimjames wrote: »

Maybe MSE should campaign for this. It's seems utterly bizarre that the limit for savings is £75/85k yet for investments is 30% lower. Why isn't there a clamour for that to be raised to £75k?

Cost perhaps? Levies are already a bone of contention. This cover isn't free the customer foots the bill.

colsten

jimjames wrote: »

Maybe MSE should campaign for this.

MSE doesn't "do" investments, so it would be a bit odd if they campaigned for something to do with investments.

Thrugelmir wrote: »

Cost perhaps? Levies are already a bone of contention. This cover isn't free the customer foots the bill.

I agree that it's always the customer who foots the bill but here's a flaw in saying the cover can't be higher as it costs the customer too much - - "they" care about the cost to the customer by not caring about the customer's money?

jimjames

Thrugelmir wrote: »

Cost perhaps? Levies are already a bone of contention. This cover isn't free the customer foots the bill.

That's true - but how many times has the FSCS scheme for investments been called upon compared to savings? The recent Dotcom credit union was just one but there appeared to be lots more and I'm not aware of any recent investment failures. It seems unfair that banks and building societies with a genuine business model are subsidising ones that are unsustainable. The same isn't the case for the FSCS investment protection scheme.