What will happen to FSCS protection on savings after Brexit?

5 mins read


Britain will keep its £85,000 savings guarantee after Brexit… but a fall in the pound means it’s currently less generous than the one in Europe

  • The £85,000 FSCS limit will be kept after Brexit 
  • The amount protected may not be adjusted until 2025
  • It has previously been linked to €100,000 worth of savings but the Bank of England has planned to keep it at a fixed level to provide certainty
  • Currently £85,000 is worth €93,300 – a lower level of protection 

British savers will still have up to £85,000 of cash savings safeguarded after Brexit, but a slump in the pound means those in the UK could have less money protected compared to those on the continent until 2025.

The Financial Services Compensation Scheme and the Bank of England have confirmed the £85,000 guarantee if a bank or building society goes bust would remain after the UK exits the Brexit transition period in a little over a week’s time.

But while the protection scheme, initially introduced under EU rules, will be kept after Brexit, the Bank of England no longer plans to keep the amount protected aligned with the €100,000 safeguarded under the EU’s own guarantee.

The UK's Financial Services Compensation Scheme was brought in as part of an EU directive, but will stay after Brexit. The £85,000 limit is meant to be aligned with €100,000

The UK’s Financial Services Compensation Scheme was brought in as part of an EU directive, but will stay after Brexit. The £85,000 limit is meant to be aligned with €100,000 

With a slump in the pound since the Brexit vote in 2016, and more recently in the face of a new rapidly surging strain of coronavirus seen in parts of England, £85,000 is now worth around €93,308.

If the Bank of England wanted to ensure savers benefited from the same level of protection afforded to those on the continent the limit would need to be raised to £91,138, with the pound trading at around €1.08.

However, although the Bank of England refused to comment publicly, This is Money understands the FSCS limit may not be adjusted until 2025, five years after the end of the Brexit transition.

The Bank of England’s Prudential Regulation Authority last upped the amount of savers’ money protected under the FSCS in January 2017, having cut it to £75,000 just two years earlier when the pound was stronger.

It is usually reviewed every five years by the PRA but this was first changed in 2018 so it would not be reviewed ‘before 2021’ and then to ‘no later than 2025’, due to the Brexit transition ending on 31 December this year.

The pound has fallen to as low as €1.08 as a no-deal Brexit looks likelier and Britain continues to be ravaged by the coronavirus

The pound has fallen to as low as €1.08 as a no-deal Brexit looks likelier and Britain continues to be ravaged by the coronavirus

The requirement to align Britain’s deposit protection scheme with the €100,000 guarantee has come in for criticism, with former Treasury Select Committee chair Lord Tyrie describing it as absurd when the protection limit was last adjusted.

‘Brexit should give the UK the opportunity to set its own level of protection’, he said at time. ‘We should take it.’

The Bank of England pointed This is Money to a policy paper from three years ago in which it also said it would seek to ‘maintain a stable deposit protection limit through the uncertainty in foreign exchange markets resulting from the EU referendum’.

The Bank of England said in 2017 it would seek to maintain the FSCS limit where possible to provide savers with certainty

The Bank of England said in 2017 it would seek to maintain the FSCS limit where possible to provide savers with certainty

It said ‘barring unforeseen events’ it would avoid making further changes to the FSCS limit, believing in ‘the merits of maintain a stable deposit protection limit through this period of uncertainty’.

The FSCS also protects money held with investment platforms or in pensions or insurance products if the provider becomes insolvent.  

When the £85,000 guarantee was first set in December 2010, the pound traded at €1.19, which worked out at around €101,000.



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