The FSCS guarantees the safety of savings kept in banks and building societies up to a limit of €100,000 to match the guarantee offered in the EU, but the UK limit is falling following the decline in the value of the euro relative to the pound.
The peer-to-peer lender commissioned Populus to survey 2,090 UK adults online between 16-17 December, finding that awareness of the level of protection provided by the FSCS is declining and many people overestimate its ability to protect them.
Only a quarter of people correctly identified the current level of FSCS protection – a slight decrease from the 30 per cent who were able to correctly identify it four months ago.
Three in ten (29 per cent) believe that the rules around the FSCS are confusing, while 13 per cent mistakenly believe that the FSCS protects their money against the pressures of inflation and 9 per cent thought the FSCS currently provides protection for more than £85,000.
Rhydian Lewis, chief executive at RateSetter explained that savers can increase their protection by splitting money between different banks and building societies.
“However, some investors with more than £75,000 in savings have told us that the reduction could prompt them to look elsewhere for a better rate – we’ve certainly seen increasing levels of investment on our platform since the change was announced.”
The FSCS limit reduction was announced in July and since then the number of people investing on RateSetter’s platform has increased by 26 per cent.
Just one in eight people (13 per cent) believe that low rates of interest on savings is a fair price to pay for the FSCS, according the survey.
Mr Lewis added that to ensure people are to make the right savings and investment decisions, it’s imperative that they know the facts.
“At the moment, awareness of what the FSCS covers and in particular, the fall in the level of protection, is alarmingly low – although it’s risen slightly compared to four months ago, there is a clear need for us, as a financial industry, to do more to address this.”