The Financial Services Authority (FSA) today confirmed that the new savings compensation limit will increase from £50,000 to £85,000 per person, per authorised firm, from 31 December 2010.
This new limit is the Sterling equivalent of the €100,000 deposit compensation limit which comes into force in all European Economic Area (EEA) member states at the end of the year.
Which? chief executive, Peter Vicary-Smith, commented: ‘These new proposals will offer increased protection for consumers but there are still a few issues that must be addressed.
‘Payouts should be per banking brand rather than per banking group. Say, for example, you had accounts with Halifax and Bank of Scotland – you should get separate payouts for each account but these proposals mean you’ll just get one as they’re run by the same company.’
Further changes coming into effect on 31 December 2010
A number of other reforms will come into force at the end of December:
- Fast payout rules, with a target of a seven day payout for the majority of claimants and the remainder within the required 20 days
- Gross payout, which protects customers by ringfencing their deposits if they have savings and loans with the same firm. Currently, any outstanding loan or debt would be deducted from any compensation.
Sheila Nicoll, director of conduct policy at the FSA said: ‘Today’s announcement completes a radical overhaul of depositor compensation. In future, all the still-separate national compensation schemes across the entire European Economic Area will offer cover at €100,000 or the local currency equivalent – a limit which will protect the vast majority of depositors.’
The UK’s Financial Services Compensation Scheme (FSCS) covers deposits with UK banks and ‘subsidiaries’ of foreign banks which operate in the UK. However, deposits in ‘branches’ of EEA banks operating in the UK will not be covered by the FSCS, but rather by the scheme of the country where the branch has its headquarters.
Find out more about savings protection under the FSCS
For full details of how your savings are protected, including a guide to which banks and building societies have separate banking licenses and which only offer one lot of £85,000 cover across all their brands, read the Which? guide to Protecting Your Savings.
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