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 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 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 £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 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.
About 3% of the population have savings above the £85,000 threshold. » | Jill Treanor | Friday, July 3, 2015
