FSCS dropped to £75k, general safety of deposits...
Discussion
So the 5-yearly review of the limit is upon us, and because the EU lower limit is EUR 100k and given the current exchange rate, the Bank of England has taken the opportunity to reduce the limit from £85k to £75k.
http://www.bbc.co.uk/news/business-33384284
http://www.telegraph.co.uk/finance/bank-of-england...
They didn't have to lower it - it was a limit after all, so not the EU's fault this time (online ignorant commenters will say differently).
Austria has has already scrapped its deposit guarantee scheme entirely, apparently the EU lower limit isn't compulsory. Deposit theft happened in Cyprus (don't remember the detail now). End of last year, there was some G20 agreement that savers are now classed as creditors making them in effect investors in the bank in the case of s
t hitting the fan - cash would be exchanged for "bail-in bonds".
So what's up? BoE reducing it's liability - sensible routine or does it see trouble ahead? What do PHers think about safety of cash deposits in banks generally?
http://www.bbc.co.uk/news/business-33384284
http://www.telegraph.co.uk/finance/bank-of-england...
They didn't have to lower it - it was a limit after all, so not the EU's fault this time (online ignorant commenters will say differently).
Austria has has already scrapped its deposit guarantee scheme entirely, apparently the EU lower limit isn't compulsory. Deposit theft happened in Cyprus (don't remember the detail now). End of last year, there was some G20 agreement that savers are now classed as creditors making them in effect investors in the bank in the case of s
t hitting the fan - cash would be exchanged for "bail-in bonds".So what's up? BoE reducing it's liability - sensible routine or does it see trouble ahead? What do PHers think about safety of cash deposits in banks generally?
Post election, the music coming from the Treasury has changed a little. The draconian, pro consumerist, anti financial services/banking rhetoric has been toned down a little and although this measure *is* due to European factors, it's also in keeping with, almost imperceptibly, a change in the direction of travel. Osborne needs FS to start generating revenue, especially if we leave the EU.
williaa68 said:
So if the wife has a fixed term deposit for > 75k which runs past 1.1.16 then potentially she is screwed? That seems pretty outrageous.
Is the organisation that is holding the money as risk of going bust then?The cover was always a fall back insurance to instil confidence in the retail marketplace, when in reality it was never required for the vast majority of deposit holders.
L555BAT said:
So what's up? BoE reducing it's liability - sensible routine or does it see trouble ahead? What do PHers think about safety of cash deposits in banks generally?
As you correctly identified, it's realigning to the EUR equivalent as part of the regular review cycle. At the same time I think the scope of the scope of the scheme has been expanded to cover some corporates. I gather there is also a consultation paper out with the banks to move to pre-funding the FSCS, sort of like a default fund at a clearing house.PurpleMoonlight said:
Is the organisation that is holding the money as risk of going bust then?
The cover was always a fall back insurance to instil confidence in the retail marketplace, when in reality it was never required for the vast majority of deposit holders.
I would hope not but it is one of the new "challenger" banks and I don't particularly like the idea of being uninsured on the top slice for approx 18 months. The cover was always a fall back insurance to instil confidence in the retail marketplace, when in reality it was never required for the vast majority of deposit holders.
williaa68 said:
So if the wife has a fixed term deposit for > 75k which runs past 1.1.16 then potentially she is screwed? That seems pretty outrageous.
Possibly not. The PRA published a consultation paper (http://www.bankofengland.co.uk/pra/Documents/publications/cp/2015/cp2315.pdf) which proposes new rules for customers affected by the reduction in protection (extract below). While not set in stone yet, there may be changes coming shortly...Proposals under consultation
1.7 The PRA proposes:
- new rules in the Depositor Protection Part to ensure depositors experiencing a decrease of
deposit protection as a result of the limit change are able to withdraw affected funds
without charge, penalty or loss of interest from 1 August 2015 until 31 December 2015;
Ginge R said:
If you fear your bank might fail, why is £85k there in the first place? The shift to £75k is a minor one - the scheme is intended to promote confidence, not insure the reckless.
I'm not sure those savers investing in RBS or Northern Rock before the crash could be called reckless. If savers are who you meant to call reckless.Ginge R said:
If you fear your bank might fail, why is £85k there in the first place? The shift to £75k is a minor one - the scheme is intended to promote confidence, not insure the reckless.
I think this is a fair comment and I dont fear the bank may fail as otherwise i wouldnt have invested. However, knowing we have protection is important and a reason why my wife limited the investment with Aldermore (the challenger in question) to below the FSCS threshold. If she had the opportunity to reduce the deposit, i think she probably would.PurpleMoonlight said:
in reality it was never required for the vast majority of deposit holders.
When the Icelandic banks collapsed many thousands of Brits were affected and claimed - I was one of them.Spread your cash around. It's easy to multiply up the £75k by opening accounts with several banks. Just make sure that you don't pick two names which are operating under one licence. For instance, Lloyds, Halifax and Saga are all the same person so can only protect one lot of £75k across all three of them.
This subject can be a huge headache if you are "between properties" and need to bank the whole proceeds of sale.
Ozzie Osmond said:
This subject can be a huge headache if you are "between properties" and need to bank the whole proceeds of sale.
The FSCS provides extended coverage (GBP 1m for 6mths) for 'Temporary High Balances' which includes proceeds from a property purchase. Details here: http://www.fscs.org.uk/what-we-cover/questions-and...TheHoof said:
The FSCS provides extended coverage (GBP 1m for 6mths) for 'Temporary High Balances' which includes proceeds from a property purchase. Details here: http://www.fscs.org.uk/what-we-cover/questions-and...
Didn't know that!! At least it can be helpful for up to 6 months. Thanks....Ozzie Osmond said:
TheHoof said:
The FSCS provides extended coverage (GBP 1m for 6mths) for 'Temporary High Balances' which includes proceeds from a property purchase. Details here: http://www.fscs.org.uk/what-we-cover/questions-and...
Didn't know that!! At least it can be helpful for up to 6 months. Thanks....Still leaves me in dilemma about what to do when I win the lottery.
uknick said:
Ginge R said:
If you fear your bank might fail, why is £85k there in the first place? The shift to £75k is a minor one - the scheme is intended to promote confidence, not insure the reckless.
I'm not sure those savers investing in RBS or Northern Rock before the crash could be called reckless. If savers are who you meant to call reckless.Gassing Station | Finance | Top of Page | What's New | My Stuff