The European Commission is to raise bank savings protection under the Financial Services Compensation Scheme (FSCS) to €100,000.
For the sterling area this will be set, based on exchange rates at the end of 2010, at between £80,000 – £85,000, and is a substantial increase on the current bank savings protection guarantee of £50,000.
‘This means that each person with UK bank savings will now be guaranteed a return of at least that amount, in the event that a bank or building society were to collapse or fail. The increased level of cover applies to any bank based in the European Economic Area, and is part of a plan to harmonise bank savings protection throughout the EU.
The measures will take effect at the beginning of 2011, as part of a general strategy to reassure savers who were unsettled by the failure of the Icelandic banks in 2008. The proposals also stipulate that compensation of UK bank savings will be paid within seven days, whereas investors in the Icelandic banks had to wait for up to 8 weeks for their compensation, after the 2008 collapse.
Information from the Financial Services Compensation Scheme (FSCS) indicates that the new levels will cover 98% of those with UK bank savings, compared with 97% who had been covered by the lower £50,000 level.
The higher compensation levels will also be an added incentive to the 37% of UK households who now have savings ISAs and are using ISAs savings as a means of building up UK bank savings free of tax. Consumers in the UK are currently entitled to an Isas savings allowance of up to £10,200 per year, of which half can be in a cash Isa, and half in a stocks and shares Isa.
The proposals also indicate changes to the remit of the UK bank savings protection scheme. so that bank savings protection can be applied for through the FSCS in the event of the failure of a foreign bank. This will mean that UK savers will deal with an authority in the UK, rather than having to deal with a bank savings protection scheme in another EU country.
[...] and £85,000 from the beginning of 2011. This is good news for the nation’a holders of ISA savings and bank savings accounts. The new levels will be an EU standard and should go a long way [...]