More of your cash will be protected from next month – and there’s a rule that you might not know
For this week’s guide, Anna Bowes, savings expert from The Private Office, explores the change to the protected cash limit and the best interest rates available…
As we told you earlier this week, more of your cash will be protected by the Financial Services Compensation Scheme from 1 December.
The limit is rising to £120,000 from £85,000, a 41% increase.
This protection applies per person, per provider, so joint account holders will have up to £240,000 protected with each provider.
For cash savers, the FSCS provides crucial reassurance. If your bank, building society or credit union were to go bust, your eligible savings (up to the protection limit) should be returned to you within seven days.
Need to know
The key thing to note is that the protection is per person, per banking licence, not per account. This is important because some providers share a banking licence, for example, Santander and Cahoot, or Halifax, Lloyds and Bank of Scotland.
The compensation limit applies to the total amount held across all the brands under the same banking licence. So, if you have £50,000 in a Santander account and £50,000 in a Cahoot savings account, currently £15,000 would be at risk – although from 1 December all will be safe when the limit rises to £120,000.
“You can check on the FSCS website to see if the provider you are considering is part of the FSCS,” Bowes says.
You probably didn’t know…
There’s a lesser-known element of the FSCS that many people may not be aware of: the temporary high balance (THB) protection.
This provides an important safety net for individuals who, for a limited period, receive unusually large sums.
“Under the current THB rules, in addition to the standard cover, balances of up to £1m can be protected for up to six months following certain life events, such as the sale of your main home, receiving an inheritance, or an insurance payout. From 1 December this will increase to £1.4m,” Bowes says.
“But this element of the FSCS protection is slightly different – with the THB, you will need proof of where the money came from should you ever need to make a claim, whereas the standard protection is automatically in place.”
The best rates on the market
The latest inflation figures suggest the rising cost of living is slowing once again, and that means more experts are expecting the Bank of England to cut the base rate next month.
If that happens, it’s inevitable that savings rates will start to fall – so it makes sense to make sure you are earning as much as you can from your savings to at least mitigate some of the damaging effects of inflation.
Here are the best rates on the market in four key areas…
