Financial Services Compensation Scheme

The bank deposit guarantee limit is the amount of money that is guaranteed for savers in UK banks and building societies should the institution become insolvent. The Financial Services Compensation Scheme (FSCS) guarantee amount is currently £75,000 per person, per authorised bank or building society.

The guaranteed amount was reduced from £85,000 at the beginning of this year as a result of the limit being pegged at the sterling equivalent of €100,000. The £85,000 limit has been in place since 2010.

Whilst the limit is enough to cover the deposits of more than 95% of all savers in the UK, many banks were dismayed by the reduction. Given the recent post-Brexit fall in the value of Sterling, the Prudential Regulation Authority (PRA) is now consulting on resetting the deposit protection limit to protect depositors up to £85,000 as of 30 January 2017.

The PRA is also proposing giving financial institutions a transitional period until 30 June 2017 to implement the revised deposit protection limit. The consultation closes on Friday 16 December 2016 and an announcement is to be expected shortly after that date on what limit will apply.

In the meantime, savers with more than £75,000 should consider opening multiple bank accounts with separate banks and building societies in order to increase their guaranteed savings limits. The FSCS was set up mainly to assist private individuals, although businesses and small local authorities (such as parish councils) are also covered. The compensation limit is doubled for joint account holders.

There is additional protection available to savers with certain types of temporary high balances, for example proceeds from a house sale, benefits payable under an insurance policy and inheritances. The additional FSCS protection is for amounts of up to £1m per depositor per life event and is available for up to six months. The FSCS offers unlimited cover for personal injury claims.

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