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Bank of England to cut amount of personal savings protected by £10,000 Bank of England to cut amount of personal savings protected by £10,000
(about 3 hours later)
The Bank of England has been forced to make a £10,000 cut in the amount of individual savings protected when banks go bust because of the slump in the euro over the past five years. The Bank of England has been forced cut by £10,000 the amount of a saver’s money that would be protected if a bank went bust, because of the slump in the euro over the past five years.
The fall means that £75,000 of savings will now be covered by the guarantee scheme, rather than £85,000 – a move that may surprise millions of savers. The guarantee will now cover £75,000 per account rather than £85,000 – a move that may surprise savers and was described as bonkers by one expert.
The Bank said it had to reduce the cover to bring the UK in line with the rest of the EU, which has set a threshold of saver protection at €100,000 (£71,000). That measure was introduced after the 2008 banking crisis to prevent savers being enticed to move money across borders to chase the highest level of protection. The Bank has to reduce the cover to bring the UK into line with the rest of the EU, which has set a threshold of saver protection at €100,000 That measure was introduced after the 2008 banking crisis to prevent savers moving their money across borders to chase the highest level of protection.
The £85,000 limit was set in 2010 and has to be reviewed every five years to keep it in line with the EU’s stipulation. Changes in the value of the euro since then mean the Bank has to alter the conversion rate used to translate euros into pounds at the Financial Services Compensation Scheme (FSCS).The £85,000 limit was set in 2010 and has to be reviewed every five years to keep it in line with the EU’s stipulation. Changes in the value of the euro since then mean the Bank has to alter the conversion rate used to translate euros into pounds at the Financial Services Compensation Scheme (FSCS).
Andrew Tyrie, the Conservative MP who chairs the Treasury select committee, said it was absurd that the 16% fall in the euro was having an impact on the protection provided to UK savers. He said he would write to the chancellor, George Osborne, to urge him to raise the matter with his EU counterparts.
“He may need to be robust – this won’t matter a scrap to the eurozone. Something will clearly have to be done,” said Tyrie.
Danny Cox, chartered financial planner at Hargreaves Lansdown, said: “This is absolutely bonkers. Savers are already suffering rock bottom interest rates, and now to add insult to injury the safety of that cash is being undermined”.
Related: Bank of England proposes savings protection limit of £1mRelated: Bank of England proposes savings protection limit of £1m
The new limit kicks in immediately, although the Treasury is putting legislation to maintain the £85,000 figure until the end of the year. The Bank has also launched a consultation to try to tackle the consequences for individuals locked in to long-term savings products with the aim of allowing savers to move the £10,000 that will no longer be covered without having to pay a fee. The Treasury is maintaining the £85,000 figure until the end of the year. The Bank has also launched a consultation to try to tackle the consequences for individuals locked in to long-term savings products with the aim of allowing savers to move the £10,000 that will no longer be covered without having to pay a fee.
About 3% of the population have savings above the £85,000 threshold.About 3% of the population have savings above the £85,000 threshold.
The Bank said: “The new limit has been set today at £75,000. However, HM Treasury has put in place legislation to maintain the existing limit of £85,000 until 31 December 2015 for depositors who were previously protected by the FSCS and continue to be protected (including individuals and small companies).” As well as individuals and smaller companies already covered, larger companies will also now have the first £75,000 in the bank covered by the scheme. Changes are also being made so savings of up to £1m will be covered for six months where money has been temporarily deposited, for instance from a house sale or insurance claim.
Larger companies – previously not covered by the FSCS – will now have the first £75,000 covered by the scheme. Changes are also being made so savings of up to £1m will be covered for six months to protect money temporarily deposited in a bank, for instance from a house sale or insurance claim.
The FSCS exists to protect customers of banks, building societies and credit unions that collapse. The near-collapse of Northern Rock in 2007 forced policymakers to take action on deposit protection. At the time, the Labour government moved to guarantee 100% of £35,000 of savings, replacing a tiered system of protection. It was increased to £50,000 during the 2008 banking crisis and £85,000 at the end of 2010.The FSCS exists to protect customers of banks, building societies and credit unions that collapse. The near-collapse of Northern Rock in 2007 forced policymakers to take action on deposit protection. At the time, the Labour government moved to guarantee 100% of £35,000 of savings, replacing a tiered system of protection. It was increased to £50,000 during the 2008 banking crisis and £85,000 at the end of 2010.