FSCS reduced thresholds
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canelo
Posts: 3 Newbie
Hi there,
I have a couple of accounts at or just below the £85,000 threshold for FSCS protection held in 2 year fixed rate bonds because the interest rate is slightly higher.
What would happen in the event of FSCS reducing that threshold, like they did 3/4 years ago when it was reduced to £75,0000. My money is inaccessible because it is in a bond so I can't reduce the balance. Would I lose my money despite being encouraged by everyone, including this website :money: that any investments up to £85k would be perfectly safe.
Hope someone can answer this because the banks don't seem to know and the FSCS wont reply to my emails.
Thanks for reading.
I have a couple of accounts at or just below the £85,000 threshold for FSCS protection held in 2 year fixed rate bonds because the interest rate is slightly higher.
What would happen in the event of FSCS reducing that threshold, like they did 3/4 years ago when it was reduced to £75,0000. My money is inaccessible because it is in a bond so I can't reduce the balance. Would I lose my money despite being encouraged by everyone, including this website :money: that any investments up to £85k would be perfectly safe.
Hope someone can answer this because the banks don't seem to know and the FSCS wont reply to my emails.
Thanks for reading.
0
Comments
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Last time this happened, people were allowed to reduce their holdings without penalty.
Have you got reason to believe it will happen again in the near or medium term future?0 -
Brexit. There is a lot of uncertainty currently. Atom tell me I could not touch my money, and they would only pay out on the reduced threshold should that happen0
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Brexit. There is a lot of uncertainty currently.
Given the recent devaluation of the pound there's an argument to increase FSCS protection to cover the spending power that it used to protect.Atom tell me I could not touch my money, and they would only pay out on the reduced threshold should that happen
Atom wouldn't be paying your compensation as they would have failed. If this really concerns you then chunk up the money into smaller packages with unrelated institutions next time you make a fixed term commitment.0 -
At present, as I understand it, the FSCS limit is set by EU directive in relation to the equivalent of 100,000 euros.
So after the pound gained against the euro in 2015, the euro limit expressed in pounds was reduced to £75k in 2016.
After the pound fell against the euro in 2016/17, the limit was raised to £85k.
Since then the pound has fallen further against the euro, so the likelihood is that the FSCS limit in pounds may rise if anything (and not fall) in the near future.
So your savings up to £85k should all be safe.
It would take a very big rise in sterling to cause another fall in the FSCS limit, I think.
(For accounts where interest is compounded (not paid away) people might want to deposit somewhat less than £85k initially, to allow for accrued interest taking the balance above the compo limit).0 -
The banks are not saying that they (the banks) will not pay you back any amounts in excess of the threshold, in the normal course of business.Brexit. There is a lot of uncertainty currently. Atom tell me I could not touch my money, and they would only pay out on the reduced threshold should that happen
They are saying that if the bank goes bust having failed to pay you back the money which you deposited with them, there is an industry-funded compensation scheme which will pay out to cover your losses up to a certain limit. The banks and the FSCS itself are unable to tell you what the limit will be at the time they go bust, because they are not planning to go bust on a specific day (banks don't usually go bust at all), and cannot predict the future. Any changes to reduce the limit would be flagged well in advance of the limit changing, during which your deposits would be getting closer and closer to maturity without the protection reducing.
If it worries you, when your monies come back off deposit, spread your £170k+ across more institutions.0 -
Considering we had a higher limit but had to reduce to be in line with the EU at £75k, and now we are leaving we have increased it back to £85k so I don't see it being reduced again.
If you're worried, just spread it across more financial insitutions.0 -
You have this the wrong way round!20SmthngSver wrote: »Considering we had a higher limit but had to reduce to be in line with the EU at £75k, and now we are leaving we have increased it back to £85k so I don't see it being reduced again.
We had lower limits of £35K and then £50K but increased it to £85K in 2008 in order to align with the EU's €100K standard.
Since then, changes have been driven by exchange rates, not politics - it was dropped to £75K in 2015 because the pound had strengthened, but this was reversed back to £85K in 2017 following some later devaluation of sterling again.
As mentioned in earlier posts, if precise currency correlation was to be maintained then the limit should today be more like £92,500 but conversely if the pound was to strengthen significantly against the euro then there'd be justification to decrease it again.
However, once out of the EU, although there are many areas of regulatory activity that will deliberately be maintained in alignment with EU, it may be that future UK governments will choose to decouple FSCS limit alignment and if that were to happen then I doubt it would be to our advantage....0 -
As above as someone else said, it was reduced to £75k then put back up to £85k, pegged to 100k Euros.0
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Indeed - that much is factually correct.20SmthngSver wrote: »As above as someone else said, it was reduced to £75k then put back up to £85k, pegged to 100k Euros.
However, the way you worded your post clearly implied that we chose to increase it back to £85K because we're leaving the EU ("now we are leaving we have increased it back to £85k") but that's not the case, although it could be argued that it was ultimately caused by the referendum result.
Similarly, "we had a higher limit but had to reduce to be in line with the EU" suggests (to me) that we had a higher limit before we initially aligned with the EU, whereas the 2015 reduction was a routine predefined consequence of the pegging to €100K that's been in place since 2008, before which our unaligned limit was lower than this.0 -
I remember seeing several articles when it was increased to £85k post referendum and they all said it was because of that aka leaving the EU and regulatory alignment wasn't required. That's all I was going by.0
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