Deposit Protection Scheme Limit Reduced but New Categories of Deposit now Covered
Posted on 3 July 2015 by
The Bank of England has announced today that as a result of sterling improving against the euro over the last 5 years the limit for the depositor protection scheme (FSCS) will be reduced from £85,000 to £75,000 from 1st January 2016 for most accounts. This should allow plenty of time for those with between £75,000 and £85,000 on deposit with an institution to switch part of it should they wish.
The reason for this change is that every 5 years the European Deposit Guarantee Schemes Directive requires non euro member states to re-set at the equivalent of 100,000 Euros and so the limit will stay at this level for 5 years, at which time it could either increase or decrease, or stay the same.
Some depositors protected by the FSCS will be contractually tied into products with balances above £75,000. Subject to the results of a consultation which closes on 24 July the Prudential Regulation Authority intends to allow depositors to withdraw funds between the old and new limits without penalty from 1 August 2015 until 31
There are also two important pluses where the Directive has extended deposit protection:
- The new £75,000 limit will from today also apply to some categories of depositors who were not previously covered by the compensation scheme, in particular large corporates.
- From today depositors with temporary high balances will be covered up to £1m for 6 months from the date on which the money is transferred into their account, or the date on which the depositor becomes entitled to the amount, whichever is later.
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