Savers 'locked in' to savings accounts will be able to withdraw up to £10,000 without penalty.
Savers will be able to withdraw up to £10,000 without penalty when the Financial Services Compensation Scheme (FSCS) deposit protection limit falls at the end of the year.
From 1st January 2016 the amount covered by the FSCS, should a bank or building society collapse, will fall from £85,000 to £75,000.
The Prudential Regulation Authority (PRA) has now confirmed that savers with balances above £75,000 in one institution who are tied in to savings products – for example a five-year savings bond – will be able to request to withdraw up to £10,000, without facing an exit fee or charge. Exactly how much they can withdraw depends on how far above the new protection limit their savings balance would be at maturity.
[SPOTLIGHT]Savers will be able to request withdrawals right up until 31st December, though firms are not required to actually release the cash before 1st October. So while you can put the wheels in motion for a withdrawal today, you won’t get that cash for another couple of months at least.
Why has the limit changed?
The PRA announced that the deposit protection limit would be reduced back in July. This is because the deposit limit is set across Europe at the equivalent of €100,000 and the pound has performed very strongly against the euro since the limit was set back in 2010. According to the FSCS just 5% of savers are actually affected by the limit change.
Note that both the current £85,000 limit and the new £75,000 limit applies per banking licence, not per bank or building society. So, for example, if you have £75,000 in TSB, you will be fine, as it has its own banking licence.
However, if you have £40,000 in an HSBC account and £40,000 in a First Direct account, you will need to withdraw £5,000 from somewhere to go below the new limit.
For a full list of banking licences, see our guide Which banks are connected?
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