£50,000 limit is welcome
| Published: 1st July 2008 22:06 |
Comment from Martin Lewis, creator of Consumer Revenge website MoneySavingExpert.com, on the possible rise in the savings protection limit of the Financial Services Compensation Scheme (FSCS), from £35,000 to £50,000 to be announced by the Chancellor today.
On the increase to £50,000.
"Any rise in the amount is very welcome; hopefully not because it'll ever be practically needed, but more importantly, to persuade savers that their cash is safe. With growing mutterings about keeping cash under the mattress, over the last year we've run the risk of returning to the Victorian era. This latest announcement should help quell fears."
On the Treasury finally putting enough in the kitty.
"Until this point, the FSCS coverage has in many ways been farcical. There's no pot of cash sitting ready and waiting; instead it has the power to operate a 'compulsory levy' on banks and insurers signed up to the scheme, as and when it needs the money. Yet there's a cap of just over £4 billion on how much it can raise in a year and staggeringly even the FSA's own 2007 review document said this wouldn't be enough to cover the twenty fifth biggest deposit taker; never mind high street names.
"A couple of months ago, while interviewing Chief Secretary to the Treasury, Yvette Cooper, for ITV1's Tonight, I pushed her on the fact that the scheme itself wasn't any real security, as if it ever needed to pay out, the cash wasn't there. While initially there was no clarification, afterward the Treasury sent this statement:
In the unlikely event a major bank became insolvent, the Government would ensure that the FSCS has access to enough immediate funding to pay out depositors in a timely manner, through borrowing from the Government or Bank of England. The FSCS could then levy up to £4 billion per year from the financial services industry to cover the costs of compensation.
"Such back-of-the-envelope solutions don't exactly inspire consumer confidence, so it's delightful to read that the new proposals contain the following:"
5.51 The Government will therefore include provision in the forthcoming legislation to allow the National Loans Fund to lend to the FSCS. These loans will have to be repaid, with interest charged at appropriate market rates, out of future levies on the industry, as well as from the share of recoveries from the estate of the failed bank that accrue to the FSCS.
"Hopefully, this won't just be provisions, but a genuine guarantee for savers that if your bank goes bust you'll get the £50,000 per person per institution back. If that's the end result then it's a real and effective move toward protecting people's hard earned savings. "
Full safe savings guide at www.moneysavingexpert.com/safesavings
