Weak pound pushes FSCS deposit limit back up to £85,000

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The Financial Services Compensation Scheme limit payable to savers in the event their bank or building society collapses has returned to £85,000.

In July 2015 it was announced the compensation limit would be cut to £75,000, effective from the start of 2016.

The strong pound at the time was the reason behind the downwards move. The compensation limit is set by an EU directive, which fixes the level of protection across the European Union at €100,000 or its currency equivalent.

The limit is usually tweaked every five years, but the directive states exceptions for more frequent reviews can be made for unforeseen events, including currency fluctuations.

A beginner's guide to the Financial Services Compensation Scheme

UNFORESEEN EVENTS

In light of the steep deprecation of the pound since June's Brexit vote, the Bank of England last November said it had started consulting on plans to restore the limit back up to £85,000 for deposits with firms authorised by the Prudential Regulation Authority.

It was announced today (30 January) that the increased protection limit will come into force straight away. Providers will have until 30 June to implement the necessary changes to their systems.

Mark Neale, chief executive of the FSCS, says: 'The £85,000 limit protects about 98 per cent of the UK public. More people will have more protection for more of their money.'

Sarah Pennells, founder of money website SavvyWoman.co.uk, comments: 'It's good news that savers will once again be able to protect up to £85,000 of their savings with a bank or building society, but there has been some confusion about when the change is kicking in.

'Several of the big savings providers are still saying that the limit is only £75,000 - and under the rules they have until the end of June to change their marketing material.

'The limit was reduced from £85,000 to £75,000 just over a year ago, and I reckon many savers will be baffled by this latest change, especially if banks display incorrect information.'


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