Deposit protection to fall

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The compensation for deposits is to be cut by £10,000.

On 3rd July, a few days before the Budget, the Prudential Regulatory Authority (PRA) announced that the level of Financial Services Compensation Scheme (FSCS) protection for depositors was to be cut from £85,000 to £75,000. The PRA, which is part of the Bank of England, blamed the change on the requirements of the European Deposit Guarantee Schemes Directive. The Directive says that non-Eurozone countries must recalculate their deposit protection limit every five years, setting it at the equivalent in their domestic currency to €100,000, albeit with some judicious rounding permitted.

As sterling has strengthened considerably against the Euro since mid-2010, the protection given to deposits has dropped. However, as the Directive only sets a minimum, the Treasury did make some concessions:

If these changes affect you, now could be a good time to think about whether you need to hold so much cash on deposit. After all, it may be earning little more than 1% – and that’s before tax.

For more information, please contact us or visit the FSCS website.

Shrinking protected piggy banks, as the FSCS cuts protection for depositors

The value of your investment can go down as well as up and you may not get back the full amount you invested.

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