Britain’s savers still in the dark over new compensation limit

News - Funds

Written by Ray Clancy

Tuesday, 07 December 2010 10:12

The Financial Services Compensation Scheme is due to raise the level of protection on consumers’ savings in less than a month, yet almost 60% of British people are unaware of the impending changes, research shows.

A poll by comparison site moneysupermarket.com also reveals that over half of consumers, some 52.2%, know the current compensation limit, but are unaware it is changing. Encouragingly though only 6% do not know the current level of protection available, which shows how consumer attitudes have changed.

The FSCS currently offers a lower level of compensation than other European schemes with only the first £50,000, £100,000 for joint accounts, protected should a bank collapse.

However from the 01 January 2011, UK savers will receive protection in line with other European depositor schemes (€100,000) which will be fixed at £85,000 for the next five years or £170,000 for joint accounts6

‘The amount of protection savers are entitled to became a huge issue during the banking crisis and any increased protection for UK savers should clearly be considered great news, especially as savers struggle to find good returns in a low base rate environment. This should also boost consumer confidence throughout the European market,’ said Kevin Mountford, head of banking at moneysupermarket.

‘It’s also encouraging to see over 40% of people are aware the scheme is changing and this is surely a sign that an ever increasing number of British consumers are starting to engage with their finances,’ he added.

‘However, with almost 60% of people unaware of the changes and a further 12% unsure of the new limit, the FSCS has a lot more work to do in terms of bringing the nation up to speed over the coming months,’ he continued.

But he said awareness of the scheme is still extremely high possibly due to the Icelandic banking crisis and other financial disasters recently. But they still need to protect their money, Mountford pointed out.

‘Until January consumers with over £50,000 in the bank should ensure their money is spread between accounts, taking care to avoid using two products from the same provider as only £50,000, or £100,000 for joint accounts, is protected within each institution. It is important savers check which banking group their accounts sit with, as two seemingly distinct providers might fall under the same banking umbrella. For example, First Direct is owned by HSBC, meaning any customer who has money saved with both providers will only be protected up to £50,000,’ he warned.