LONDON, U.K.–Insurance coverage on consumer deposits in the U.K.’s banks, building societies and credit unions is about to decline.
Currently, £85,000 of savings are protected through the Financial Services Compensation Scheme (FSCS), which is in line with the European deposit insurance guarantee of €100,000.
But EU regulations require the U.K. figure be recalculated every five years and the stronger pound means the EU limit is now worth less when converted into the U.K. currency, according to authorities. As a result, the FSCS has therefore been forced to lower its protection limit by £10,000 to £75,000 (£150,000 for joint accounts).
The lower insurance coverage is news to most British consumers, according to a survey conducted by peer-to-peer lender RateSetter.co.uk. In a statement, that company’s CEO, Rhydian Lewis, said the change will only add to the confusion about the FSCS. “Too many people have no idea what protection it offers. Some mistakenly believe it protects their money against inflation.”
Research conducted by GE Capital Direct found that more than half of savers with more than £75,000 will do nothing to prepare for the new lower limit.
Deposit insurance in the U.K. under the FSCU comes with another caveat. While the £75,000 limit applies per institution, consumers can protect themselves by holding accounts at different banks, building societies or credit unions. However, Hannah Maundrell, editor-in-chief of Money.co.uk, noted that “Many bank brands operate under the same license. Any savings over the limit could still be vulnerable.” That means that a depositor could have money in several different bank brands, for instance, but they are covered by just one deposit insurance license, meaning the depositor’s coverage in those institutions is capped at £75,000.