The protection threshold on savings is to return to its previous limit of £85,000, it was announced on Monday.
Despite the sterling’s rise against the Euro forcing the Bank of England to lower the compensation limit to £75,000 in July 2015, in the wake of the Brexit vote, “sterling has fallen more than 10% against the euro”.
The Bank of England have thus declared the change to the Financial Services Compensation Scheme (FSCS) will take effect from 30 January 2017.
Currently, the protection threshold on savings is set at 100,000 across the EU, and typically is reviewed every five years. In light of “unforeseen events, such as currency fluctuations” a more frequent assessment is permitted.
The Bank said “taking into consideration the developments in financial markets following the UK’s referendum vote to leave the European Union on the 23rd June 2016, including with respect to the (pound- euro) exchange rate, the PRA considers that a structural shift in exchange rate has occurred” and fundamentally that “these events were unforeseen when the UK limit was reduced in 2015”.
Danny Cox, charted financial planner at IFA firm Hargreaves Lansdown, said “the popularity of government – backed National Savings & Investments products” reinforces the importance of security to people.
He trusts that “resetting the FSCS limit back to £85,000” will set a more positive tone for savers.
Savings providers will have until next summer to alter the conditions on their publicity material, such as adverts and letters to customers.