UK Savings Guarantee Rises to £50,000

The Financial Services Authority (FSA) has raised the compensation limit for savings from £35,000 to £50,000 pounds per customer claim. This comes after signs of savers withdrawing cash to put into “safer” havens. This sum could be further increased as the British Government battles to restore confidence in the banking sector.

Britain’s move fell well short of Ireland’s no limits guarantee for all savers. There are now worries of significant cash outflows from British to Irish banks, due to savers worries about the security of their deposits. Nerves are still unsettled after the rescue of Northern Rock and Bradford & Bingley and the takeover of HBOS.

The FSA indicated that the raised compensation ceiling would take effect from October 7, and that savers with joint accounts would be eligible to claim up to £100,000 should their bank collapse.

With around 40% of UK savings accounts exceeding £50,000, a further increase in the compensation cap will be needed to sufficiently bolster saver confidence. The FSA stated that it will consult on further reforms, including considering whether the compensation limit should be increased above £50,000.