The Financial Services Compensation Scheme (the Scheme), which guarantees deposits in a savings account, promising to refund customers if their bank or building society collapses, has announced two changes to the Scheme’s operation:
Reduced limit for deposits protected by the Scheme
The limit on the level of deposits which benefit from the Scheme is to be reduced from £85,000 per person to £75,000 per person in January, reflecting the recent fall in the value of the euro against the pound. The limit is reviewed every five years and aligned to the sterling equivalent of €100,000.
New £1m limit for temporary high balances
The Scheme now provides a £1m protection limit for temporary high balances held with a bank, building society or credit union if it fails, providing an additional layer of protection for up to six months for some consumers with higher balances.
Examples of items which qualify as a temporary high balance (and therefore protection under the Scheme) include sums paid to the depositor in respect of:
- Real estate transactions (property purchase, sale proceeds, equity release).
- Benefits payable under an insurance policy.
- Personal injury compensation (unlimited amount).
- Redundancy (voluntary or compulsory).
- Divorce or dissolution of their civil partnership.
- Benefits payable on retirement.
- Benefits payable on death.
- Proceeds of a deceased’s estate held by their Personal Representative.
Click here to read the full note on the FSCS website.