At present those who hold deposits with UK financial institutions are protected via the Financial Services Compensation Scheme (FSCS). This scheme provides depositors with a guarantee of up to £85,000 each (£170,000 for a joint account) should the UK institution they hold their money with fail. The £85,000 figure was set on 31st December 2010 at the time this was equivalent to €100,000. Prior to this the amount was £50,000.
With effect from 1st January 2016, the EU Deposit Guarantees Schemes Directive will require member states, who are not using the Euro to reset their depositor protection scheme. With effect from the beginning of next year the maximum protection will reduce to £75,000 per person per financial institution or £150,000 for a joint account.
As with the FSCS, depositors need to be aware of who owns the deposit taker they are using as if the parent company fails and you hold accounts with two subsidiaries or more you will only be compensated once.
Investors with more than £75,000 held on deposit should consider holding some of their savings with another financial institution in order to reduce their risk of loss in the event of the liquidation of a bank and incurring a possible ‘haircut’ on their savings.