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Bank savings protection limit cut to £75,000

The amount offered by the Financial Services Compensation Scheme in the event of a bank collapse is about to fall by £10,000.

Bank savings protection limit cut to £75,000

The protection savers receive from the Financial Compensation Scheme (FSCS) will be cut tomorrow to £75,000.

The FSCS pays compensation to savers in the event of a bank or building society failure in order to ensure they do not lose their entire savings. However, the amount of compensation covered will be reduced from £85,000 to £75,000 on 1 January – or £150,000 for joint accounts.

Those who find themselves with an inflated bank balance due to a house sale or inheritance are given six months grace on savings up to £1 million.

The banking regulator, the Prudential Regulation Authority (PRA), has blamed the fall in compensation on the weak euro.

When it announced the cut in July it blamed the European Deposit Guarantee Schemes Directive, which protects European savers to the tune of €100,000. The UK’s compensation scheme has to offer a sterling equivalent, with the exchange rate recalculated every five years. As the euro has weakened and the UK economy has recovered, the result has been a decline in the amount of protection.

The FSCS has said that 95% of deposits will still be covered but the 5% of customers affected may need to split their savings across banks and building societies to retain full compensation.

One issue that savers need to be aware of is that multiple banks can operate under one Financial Conduct Authority (FCA) licence and the £75,000 compensation limit is applied to the licence, not the individual bank or building society.

For example, if a saver had £75,000 in Halifax and another £75,000 in Barclays, and both companies went bust, the saver would receive their entire £150,000 savings back from the FSCS because Halifax and Barclays operate on two separate licences.

But, if the saver had £75,000 saved with HSBC and another £75,000 saved with First Direct and both institutions failed, the saver would only receive £75,000 back because the two banks operate on the same licence.

Hannah Maundrell of comparison site said: ‘While this should be quite simple to navigate, it’s made complicated by the fact the FSCS cover is shared between banks that operate under the same FCA licence.’

She added that in the event of another financial crisis, the government was unlikely to bail out the banks this time.

‘The government seems to be focusing on privatising its assets; they were left shouldering a heavy load after the last financial crisis so we can’t rely on them to bail out any bank, building society or credit union that fails again so you need to make sure your money is fully covered by the FSCS,’ said Maundrell.

7 comments so far. Why not have your say?

kenneth douglas

Jan 01, 2016 at 13:06

Could you provide a list of Banks, showing clearly there group affiliation. I doubt very much that the front line staff, at any bank would know who they shared FSCS cover with.

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kenneth douglas

Jan 01, 2016 at 13:06

Could you provide a list of Banks, showing clearly there group affiliation. I doubt very much that the front line staff, at any bank would know who they shared FSCS cover with.

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Jan 01, 2016 at 17:33


Please see the spreadsheets at the bottom of the link - one for banks and one for building societies - on the Bank of England website. If you have concerns other than this - I would ask your providers who their banking licence is with.

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Anthony O' Grady

Jan 02, 2016 at 23:57

I'll be buying a safe soon and withdrawing all of my savings. What's the point of allowing a bank to put your cash to work in return for circa one per cent.

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Anthony Smith

Jan 04, 2016 at 12:11

In Euro land they are actually charging customers for deposits. Maybe a decent safe is the best way forward.

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Surish Pal

Jan 04, 2016 at 17:19

Professional Cash Management Service Providers can make it easier to spread deposits across a number of institutions taking into account FSCS limits. They will also know which banks operate under which licence, so you won't have to worry about it!

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Jan 05, 2016 at 14:30

I have an Offset Mortgage, whereby the net effect is that the interest charged is neutral, as my deposit equals the value of the outstanding Mortgage.

In the event of the Bank going bust, would the figures be netted to nil or would they loose my money and chase me for the outstanding Mortgage, less the £75k of course??.

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