Money in British bank deposit accounts will be guaranteed only up to a maximum of £75,000 with effect from 1 January 2016.
The announcement was made by the Bank of England and results from EU regulations which fix €100,000 as the guarantee limit. When in 2010 that level was agreed, it equalled £85,000.
Now that the euro has dipped against sterling, the guarantee is slipping to £75,000.
It was the Northern Rock panic which helped introduce greater savings protection. Before then, just £2,000 was guaranteed fully with 90% cover for the next £30,000. The government introduced a complete guarantee on deposits up to £35,000 when panic set in in order to avoid a run on Northern Rock.
The guarantee went up to £50,000 in 2008 and to £85,000 in 2010.
"HM Treasury has today put in place legislation to maintain the existing limit of £85,000 until 31 December 2015 for depositors who were previously protected by the FSCS and continue to be protected (including individuals and small companies)," the Bank of England's Prudential Regulation Authority said.
"This transitional measure helps to ensure that depositors have suitable time to plan for and adjust to the change and will protect most depositors from experiencing a sudden change in the amount of compensation available in the event of the failure of a bank, building society or credit union."
Savers with more than £75,000 in one bank would be wise to spread the risk among several banks, although people who come into a large amount of money are given six months full protection for up to £1 million.
"Depositors with temporary high balances will be covered up to £1m for six months from the date on which the money is transferred into their account, or the date on which the depositor becomes entitled to the amount, whichever is later," the Bank of England said.
"This is to ensure that depositors are protected when they deposit funds over the limit as a result of specified events, including following a house sale or funds received from a ‘life event’ such as a divorce settlement or inheritance, for a period of time until they have had sufficient time to spread the risk between institutions to appropriately protect these funds."
An ‘institution’ is the authorised entity. Some banks and building societies have more than one high street brand under one authorised entity. Thus, if an individual has £75,000 in more than one brand within a single authorised entity, they will still only receive a maximum of £75,000 even if both went bust.
For example, among the building societies: Yorkshire Building Society also operates the N&P, Chelsea and Barnsley trading names. National Counties Building Society also has the Family Building Society trading name.
You can see a full list of banking and building society brands and which authorised firm owns them on the Prudential Regulation Authority website.
For a list of 'who owns whom' on Excel, click
http://www.bankofengland.co.uk/pra/Documents/authorisations/fscslists/fscsbankingsaving1506.xls
