The compensation limit for people who lose money if their bank, building society or credit union goes bust was increased on Friday 31st December 2010, from £50,000 to £85,000.
Compensation will be paid by the Financial Services Compensation Scheme (FSCS) – ‘the compensation fund of last resort for customers of authorised financial services firms’. The new limit is part of a Europe-wide requirement for each country to offer compensation equivalent to 100,000 euros.
The FSCS covers business conducted by firms authorised by the Financial Services Authority (FSA) who said that the new higher limit would cover the “vast majority” of UK savers. European firms (authorised by their home state regulator) that operate in the UK may also be covered. The FSCS was set up mainly to assist private individuals, although smaller businesses are also covered. Larger businesses are generally excluded, although there are some exceptions to this for deposit and insurance claims.
The FSCS protects the following:
- Banks and Building Societies
- Credit Unions
- Home Finance (including mortgage advice)
The authorities hope that the revamped FSCS rules, which will be the subject of a publicity campaign in early 2011, will be enough to stop another run on a bank. As well as offering higher compensation payouts, the new rules aim to give most claimants their money much faster than before – within seven days and the rest within 20 days. Payouts will also no longer be reduced by the amount of money that a saver might also owe their savings institution – for instance by the size of a mortgage or other loan.
If you want to clarify your own situation in relation to FSCS compensation, contact one of the team who will be happy to help.