The level of protection enjoyed by savers, with deposits held in UK registered banks and building societies, will be cut from 1st January 2016.
Currently, money held by savers is protected in full, by the Financial Services Compensation Scheme (FSCS), up to a balance of £85,000 per person, per institution. However, following an announcement today by the Prudential Regulation Authority (PRA), this will be cut to £75,000 from the New Year.
The change will apply to retail customers (individual savers) as well as small businesses and accounts held in Self-Invested Personal Pensions (SIPPs).
Why has the change been made?
The level of compensation for UK savers should be broadly equal to €100,000, when the limit was last set in 2010 this equated to £85,000.
However, since then the value of the pound has increased and the PRA, along with the Government, has deemed it necessary to reduce the cover for savers to £75,000.
According to the Government some 95% of savings will still be covered by the new limit. However, savers are bound to be angry at the cut at a time when interest rates remain so low.
What action should you take?
Savers should be somewhat reassured that the banking crisis of five or so years ago seems to be a distant memory.
However, there’s nothing wrong in being cautious.
We would therefore suggest savers consider reducing their deposits, where possible, to £75,000 per institution from 1st January 2016.
If you have money in notice accounts you should ensure you give the relevant notice to avoid incurring a penalty.
Of course some savers will have tied their money up in fixed term bonds, which do not allow early access. We would suggest these are reviewed at the end of the term.
We are here to help
If you are worried about the reduced protection your savings will enjoy our advisers are here to help you.
Call Sarah or Bev today on 0115 933 8433 or email firstname.lastname@example.org