Savings guarantee to be £50,000

Posted by admin on 5 October, 2008 under Business news | Be the First to Comment

The Financial Services Authority (FSA) has raised the limit to the amount of deposits that are guaranteed should a bank go bust to £50,000.

The new limit will come into effect on Tuesday 7 October. Previously, the first £35,000 of savers’ deposits had been protected.

The FSA will now consult on whether the limit should be raised even higher.

Chancellor Alistair Darling said the increase meant 98% of account holders would have all their savings protected.

The new UK limit is for each customer so joint accounts will be guaranteed up to £100,000.

Mr Darling said the increase would “go a long way to assuring people that their deposits are safe”.

Earlier this week, Ireland introduced an unlimited guarantee covering bank deposits.

Banks in the UK have been concerned that savers would move their money to Ireland to take advantage of the 100% protection.

Banks covered

Payments will be made through the Financial Services Compensation Scheme (FSCS) and the FSA has said that it is to look into reforms that will allow compensation to be paid faster.

“It is appropriate given the consolidation that has taken place in the banking sector” Hector Sants, chief executive, FSA

The FSCS covers all UK banks, building societies and credit unions.

Banks from outside Europe also contribute to the scheme and so their depositors are also protected.

European banks may be covered by their own schemes and customers may be covered for only 20,000 euros (£15,600).

The FSA is also to consider whether accounts with different banks that are owned by the same parent company should be covered.

At the moment, customers are only covered for one account under each banking licence so if you have two accounts with banks that are owned by the same parent company you will only have a total of £50,000 guaranteed.

“This change ties in with the introduction of the government’s Banking Bill in Parliament, which is due next week,” said FSA chief executive Hector Sants.

“It is also appropriate given the consolidation that has taken place in the banking sector.”

News reported by The BBC