Act now if the FSCS deposit protection cut will affect you
From 1 January 2016 only £75,000 of your money will be protected under the Financial Services Compensation Scheme (FSCS) if your bank or building society goes bust. This is a £10,000 drop from the current level of protection.
The new FSCS limit will reduce to £75,000 per person, per banking licence. So if you have multiple savings accounts with the same provider or providers under the same banking licence, such as Halifax, BM Savings, and Saga, which are all part of HBOS, only up of £75,000 of the total amount is protected. Any balance over this amount is at risk from 1 January.
If a provider is declared in default, any interest owed will also be paid as part of the compensation amount – so a maximum of £85,000 (currently) reducing to £75,000 in total including capital and interest.
If you will exceed the new limit coming into force in January, Susan Hannums of savingschampion.co.uk has the following advice:
“New rules state that depositors experiencing a decrease of deposit protection as a result of the limit change are able to withdraw affected funds without charge, penalty or loss of interest from 1st August until 31st December 2015.
“If you hold £85,000 or more you can request the withdrawal of up to £10,000 without penalty. If you hold less than £85,000 you can only reduce the balance to £75,000.
“The ability to withdraw this money is limited by time and will not be available after 31st December. The providers have to return the funds either within two months, or by 31st January, depending on the date at which notice was given – so get your skates on!
“If you have any easy access account, of course you can choose when to reduce the balance as there are only restrictions applied to the account itself.”