The Bank of England has launched a consultation on restoring the FSCS deposit protection limit to £85,000, up from the current limit of £75,000. The proposed change would be from 30 Jan 2017 although firms would have until 30 June 2017 to amend their systems and material. You can read the details here.
The Financial Services Compensation Scheme limit for cash savings is £75,000. This is based on the sterling equivalent of 100,000 Euro as at 3rd July 2015, the date when the deposit protection limit for depositor guarantee schemes across the EEA, including the UK was set in accordance with a European directive. The exchange rate then was €1.3992.
As at 1 July 16 (the Friday) it was at €1.1909, a 14% difference which would see a return to an £85,000 protection limit.
The European directive requires the Prudential Regulatory Authority (PRA) to review the deposit protection limit every five years so it is not due to change until July 2020.
However, the PRA can change the limit based on unforeseen events such as significant currency fluctuations.
Danny Cox, Chartered Financial Planner, Hargreaves Lansdown:
"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."
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