As the pound nosedives against the Euro, the safety net for savers is increased, but it’s still worth checking whether all your money is fully protected using this handy tool
Following The Sharp Plunge In The Value Of The Pound Against The Euro Since The Brexit Vote, There’s Good News If You Keep Your Money On Deposit
It’s Good News For Savers As The Euro Profits
The safety net for savers, which protects your money if your bank, building society or credit union goes bust, if it’s part of the scheme, returned to £85,000 at the end of January 2017 as a result of the tumbling pound.
In October 2016, Sterling fell below 1.10 Euros, marking a six-and-a-half-year low. As a direct consequence, the Bank of England has raised the cover limit under the Financial Services Compensation Scheme from £75,000 to £85,000 for individual accounts. That’s an increase of £20,000 to £170,000 on joint accounts. It used to be at this level before the protection was reduced to £75,000 on 1 January 2016.
The change was required by law to align the UK with the rest of Europe, where the limit is 100,000 Euros. Usually, this happens every five years.
When the limit was set for five years in December 2010, 100,000 Euros was worth roughly £85,000. But in July 2015, the value had fallen to £75,000, resulting in a cut in the compensation limit. At the time, the decision to decrease the limit by just £10,000 was slammed by experts as 'bonkers' and 'absurd', in response to the rise in value of the Euro.
It was expected to remain at £75,000 until its next review in 2020. But as a result of the rapid fall in the value of Sterling against the Euro, the Prudential Regulation Authority has had to increase the limit again. A review such as this occurs whenever there’s a large fluctuation in a currency’s value. Given we’re in uncertain times, it’s perfectly possible this limit could well be varied again, either up or down.
The good news is the increased limit protects the vast majority of people and businesses. Importantly, it includes money deposited in SIPP and SSAS bank accounts too. The Financial Services Compensation Scheme, which covers many more things than just deposit accounts, said this level of protection guarantees the money of around 98 per cent of people across the UK.
A Word Of Caution About Your Level Of Protection
The compensation limit is applied per banking authorisation - and some banking brands share an authorisation. It means you may want to split your deposits more widely among different firms, to prevent the total value of deposits you hold with a single firm going over the deposit protection limit.
How Much Protection Do You Have?
You can check whether your money is fully protected on the Financial Services Compensation Scheme website.
Earn Up To 14% On Your Cash
According to a recent survey by RateSetter, it discovered that savers would prefer a higher return rather than more protection, even if it came with more risk. For a limited time, RateSetter is still running its bonus offer.
More Than The Euro: A Visual Guide To The Evolution Of Currency
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Closing 1 February 2019
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