The Ups and Downs of the FSCS Figure
Last updated on October 4th, 2021 at 11:59 am
For those who may have missed this (or are just confused by it!), the Financial Services Compensation Scheme (FSCS) now covers deposit accounts back up to the previous £85,000 limit and has done since 30th January 2017. So it used to be £85,000 and then it went down to £75,000 and now it’s gone back up again! This article discusses the reason for the ups and downs in the FSCS figure and how the limit applies. Those who are revising for any of the CII AF4, AF5, CF1, R01, R02 or R06 exams will find this to be useful reading.
This article is relevant to examinable tax year 2016/17.
The PRA started a consultation back in November 2016 as a result of the European Deposit Guarantee Schemes Directive. This fixes a harmonised guarantee limit of 100,000 euros – or the equivalent. The ups and downs in the FSCS figure are because of the exchange rate; significant changes make the UK limit either more attractive or less compared with other EU countries. The sterling exchange rate was strong against a weak euro so the figure went down, and then it weakened so it’s gone up again.
The Directive says that the limit should be reviewed every 5 years, but it can also adjust this time frame if a big enough change in exchange rate justifies it, which is exactly what has happened to get two changes in less than 18 months!
The limit applies to individuals not accounts, which means that those who hold eligible joint accounts are both covered up to the £85,000 limit per PRA authorised firm. However, remember that the limit does apply per authorised firm. If a firm operates with more than one brand under the same authorisation number, then individuals who hold accounts under those different brands will only be covered up to a total of £85,000.
Ever wondered why the FSCS limit has reverted to what it was 18 months ago? Share on XTo find out if the bank or building society is part of a larger group is relatively straightforward. Firstly, the firm should have this information on any printed or electronic statement. It’s also possible to look on the FSCS website to check – https://www.fscs.org.uk/check/check-your-money-is-protected/
Nothing has changed with the temporary high balances; these are still protected up to £1m for 6 months. Deposits which qualify include money from the sale of a main residence; money paid in relation to a marriage/civil partnership divorce/dissolution of a civil partnership; redundancy pay, compensation for personal injury (with no limit), benefits under an insurance policy, compensation for wrongful conviction, benefits paid on retirement and benefits paid on death.
If a claim needs to be made for deposits over £85,000 written evidence that the deposit account qualifies as a ‘temporary high balance’ will be needed.
Grab the resources you need!
If you’re studying for your CII R01 exam, and you’re wanting all the practice you can get, grab our free taster to try out one of Brand Financial Training’s resources for yourself. Click the link to download the R01 mock exam paper taster now!
Alternatively, you can download taster resources for AF4, AF5, CF1, R02 or R06 if you’re revising for one of those exams.
Over to You…
Were you already aware of the fluctuations in the FSCS figure and why they occur?
