How safe is your cash? Changes to compensation charges in the UK
If you have large cash deposits in UK bank accounts then you might need to re-jig your finances following changes to compensation legislation in the UK.
From 1st January 2016 the Financial Services Compensation Scheme (FSCS) has reduced the amount of compensation from £85,000 per person per institution to £75,000 with protection on joint accounts lowered from £170,000 to £150,000. This is in response to exchange rate fluctuations which have seen the pound strengthen against the euro and brings the UK into line with EU regulations setting compensation at 100,000 euros.
If you are one of the lucky 5% of savers who have over £75,000 deposited with any one bank then the amount in excess of that will not be protected if the institution goes bust and you would be well advised to shift it somewhere else.
Beware though, some licenses are registered to banks which operate under different guises such as HSBC and First Direct. That means that if you have accounts with both those banks, the limit is shared over the two accounts. The same is true of Bank of Scotland and Halifax. You can check the brands operating under each registered bank by consulting the list on the Financial Conduct Authority’s website.
Not all banks operating in the UK are covered by the UK compensation scheme. Some are registered in other European countries and will offer compensation at the exchange rate at the time. This could reduce protection to under £75,000 if the euro is particularly strong. This would be the case for example, with deposits held in Swedish-registered Handelsbanken or Germany’s Fidor Bank.
The new regulations also protect those who have large temporary deposits in their accounts, for example after selling a house or receiving a redundancy payment. A £1m protection limit is granted on cash kept in an account for up to six months.
Of course, keeping large amounts of cash in the bank is not the best investment strategy. If you need advice on how to get more out of your please contact me by clicking here