Good news for holidaymakers, bad news for depositors…
The weakness of the euro is having a variety of effects – some beneficial but others not so.
In the 12 months from mid July 2014, the pound rose by over 10% against the euro. While good news for people going to Mediterranean for a holiday, it is bad news if you hold large deposits in UK banks and building societies. The maximum depositor protection provided by the Financial Services Compensation Scheme (FSCS) is determined by and EU directive, which sets the limit at €100,000.
In December 2010, when the FSCS limit was last reset, the conversion into sterling meant cover was up to £85,000. Roll forward to 3 July 2015 and a mandatory five year review means FSCS cover has been cut to £75,000. In practice, this action taken by the Treasury means that your existing deposits will continue to benefit from £85,000 of cover until the end of the year, but from then onwards the £75,000 cap applies.
However, there is a useful new provision alongside the £10,000 cut. The government has launched a new cover for ‘temporary high balances’ of up to £1m for six months, covering specified payments, such as house sale proceeds and divorce settlements.
Talk to us if you are unsure about any implications for your financial situation.
The information in this article does not constitute advice and should be used for informational purposes only. This content has been provided to Helm Godfrey by Taxbriefs.