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Savers hit by reduction in deposit protection limit

Savers hit by reduction in deposit protection limit

The decision to reduce the FSCS deposit protection limit by £10,000 has been described as a blow to savers.

Last week the PRA announced the reduction to £75,000 at the start of next year.

At the same time the regulator announced depositors with temporary high balances will be covered up to £1m for six months from the date the money is transferred into their account.

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Anna Bowes, founder of Savings Champion, said: “This is a big blow to savers, especially if they have diligently split their savings up to make sure they are protected.”

Meanwhile Richard Lloyd, the executive director of Which?, said: “We’ve consistently found bank staff have an extremely poor knowledge of the scheme so, with people’s savings soon to have less protection, we expect all banks to ensure staff are properly trained and proactively communicate these new rules to customers.”

The change is being made in line with the Deposit Guarantee Schemes Directive, which sets the FSCS coverage level at the sterling equivalent of €100,000.

Due to the increased strength of the UK economy, the value of the pound sterling has increased and it has become necessary to reduce the limit.

Andrew Tyrie, the chairman of the Treasury Select Committee, said: “It is absurd that the 16 per cent depreciation of the euro largely brought about by the crisis in the Eurozone in general, and the Greek crisis in particular, should be forcing a reduction in the level of protection available to UK depositors.

“It makes no sense to fix deposit guarantees, which need to be stable to win public confidence and which should be providing certainty and predictability for ordinary savers, to a volatile variable like the exchange rate.”

He said he would be writing to the Chancellor of the Exchequer asking that he raise this with his European Union counterparts.

Adviser view

Danny Cox, a chartered financial planner with Bristol-based Hargreaves Lansdown, said: “This is absolutely bonkers.

“Savers are already suffering rock bottom interest rates, and now to add insult to injury the safety of that cash is being undermined.”