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FSCS deposit protection limit could go back up to £85,000

Joanna Faith
Written By:
Joanna Faith

The Bank of England is considering restoring the Financial Services Compensation Scheme (FSCS) limit to £85,000 from the current £75,000 limit.

The FSCS limit refers to how much of your money is protected if your bank or building society goes bust.

The proposed change would be from 30 January 2017 but firms would have until 30 June 2017 to amend their systems and material.

In a consultation launched today, the Bank said restoring the limit to £85,000 – the level which was in effect for almost five years until 3 July 2015 – is “intended to provide a measure of memorability and consistency”.

The limit was previously reduced to £75,000 because the EU Deposit Guarantee Schemes Directive required non-euro member states of the European Union to adjust their deposit protection limits to the equivalent of €100,000.

The directive required the Prudential Regulatory Authority (PRA) to review the deposit protection limit every five years so it is not due to change until July 2020.

But the PRA can change the limit based on unforeseen events such as significant currency fluctuations.

“Taking into consideration the developments in financial markets following the UK’s referendum vote to leave the European Union on 23 June 2016, including with respect to the GBP/EUR exchange rate, the PRA considers that a structural shift in the exchange rate has occurred.  These events were unforeseen when the UK limit was reduced in 2015,” the consultation said.

Danny Cox, chartered financial planner at Hargreaves Lansdown, said: “Setting the level of deposit protection for UK savers based on the exchange rate from a foreign currency on a seemingly random date has never made much sense. We know from the popularity of NS&I products how important the security of money is and resetting the FSCS limit back to £85,000 sets a more positive tone for savers.”