Got substantial savings? Important news about deposit protection

If you have over £75,000 in savings with one bank or building society, you need to read about a major change to the protection you’ll get from next year.


At present, the Financial Services Protection Scheme (FSCS) protects deposits up to £85,000 in the event of the failure of a regulated bank, building society or credit union.

So if, for example, your bank went bust, you wouldn’t lose money up to this amount – the government would honour your deposit.

The £85,000 limit applies per individual, so joint accounts enjoy £170,000 of protection.

This limit is changing. From the beginning of 2016, it will fall to £75,000 (£150,000 for joint accounts).

So if you have more than £75,000 in a savings account, you should consider moving a portion of it to another institution to ensure all your savings fall within the new FSCS limits.

Why is the limit being cut?

The FSCS operates under a European directive which requires the amount of protection in sterling to be equivalent to 100,000 euros (the limit for accounts elsewhere in the EU).

The sterling amount is recalculated every five years to take account of changes in currency valuations. The increasing strength of sterling relative to the euro now means the equivalent figure is £75,000. 

Kevin Mountford, head of banking at MoneySuperMarket, said: “The decision to decrease the level of protection savers get is a disappointing one, particularly as it will be fixed for the next five years.

“Although the FSCS says the £75,000 limit will still protect 97% of savers, anyone with more than that amount in savings must act to move the excess to a different provider, before December 31, to ensure they are fully protected.”

What about fixed rate accounts?

For anyone with more than £75,000 in a fixed rate, fixed term account that extends beyond next January, a consultation is taking place to help manage the impact of the limit change. This consultation ends on July 24, 2015.

It is expected that depositors will be allowed to withdraw funds between the old and new limits without penalty from August 1, 2015 until December 31, 2015. In normal circumstances, such accounts dock interest or ban withdrawals completely.

Kevin Mountford said: “We urge providers to be flexible with savers who won’t have seen this change coming.”

The decision to decrease the level of protection savers get is a disappointing one

Temporary high balances

In another change, depositors with temporary high balances are now covered up to £1 million for six months.

This is to ensure depositors are protected when they deposit funds over the FSCS limit as a result of specified events.

These include getting the proceeds of a house sale or acquiring funds after a ‘life event’ such as a divorce settlement or inheritance. The six-month protection period is intended to provide sufficient time to spread the risk between institutions.

For insurance policyholders, the PRA has changed the insurance limits for FSCS compensation to increase protection for policyholders in the event of an insurer failing.

This increases the limit to 100% of cover for all long term policies, for professional indemnity insurance and claims arising from death or incapacity.

Deposit protection timeline

Before 2007, only the first £2,000 of a deposit was completely protected, as well as 90pc of the next £30,000.

To soothe concerns triggered by the collapse of Northern Rock during the financial crisis, the government introduced a complete guarantee on deposits of up to £35,000.

The guarantee was then raised to £50,000 in 2008 and to £85,000 in 2010, in line with the EU’s 100,000 euros guarantee.

Please note: any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.


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