More protection for cash deposits
The Financial Services Compensation Scheme (FSCS) will be increasing the compensation limit on cash deposits to the sterling equivalent of €100,000 in January 2011.
Under current rules, savers receive protection of up to £50,000 per saver per financial institution.
The changes at the start of next year reflect new European legislation.
Whilst the Sterling equivalent level of protection has not yet been decided, it has been confirmed that an exchange rate will be agreed and then fixed so it does not keep fluctuating.
If fixed based on the current exchange rate, the compensation limit would increased from £50,000 to £85,000. It would increase from £100,000 to £170,000 for joint accounts.
The Financial Services Authority (FSA) will be issuing a consultation on the new deposit limit next month.
It is important to remember a few important things about the Financial Services Compensation Scheme.
Firstly, you receive protection on the net value of your savings with a financial institution. This means that if you had a mortgage or overdraft with the same bank as your savings, this debt would be knocked off the value of your savings before your eligibility for compensation would be calculated.
Secondly, the protection limit applies to each individual banking licence, so there is a risk that you are not getting additional protection when saving with more than one bank or building society if they share the same banking licence.
Do speak to us if you have any questions or concerns about the financial security of your savings.
Image courtesy of Dave McLear.