Safeguarding large cash balances
As concerns have intensified over the last few months regarding the stability of financial institutions, the Financial Services Compensation Scheme (FSCS) has taken steps to extend its protection for savers with temporary high cash balances.
In addition to the protection provided for deposits with banks, building societies and credit unions of £85,000 per person, further protection for consumers with temporarily high balances of up to £1m also exists and has been extended due to the pandemic. Having a large balance for a short period of time is inevitable in certain situations, such as a house sale, redundancy, divorce settlement or an insurance payout.
In normal circumstances, these temporary high balances are protected for six months, with the FSCS automatically paying compensation if the financial institution failed. However, from 6 August 2020, the FSCS extended its coverage to 12 months. The scheme will revert to a six-month cover period from 1 February 2021.
This temporary extension addresses consumers’ concerns that money could be on deposit for longer, due to a slowdown in the banking system and reduced access to banking services for many people. FSCS Chief Executive Caroline Rainbird commented, “The coronavirus pandemic has been very worrying for everyone, and people are understandably concerned about the possibility of losing their temporary high balance should their deposit taker fail. The temporary extension of FSCS‘s protection from six to 12 months will do much to reassure them should the worst happen during these uncertain times.”
It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor. No part of this document may be reproduced in any manner without prior permission.
The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. If you withdraw from an investment in the early years, you may not get back the full amount you invested. Changes in the rates of exchange may have an adverse effect on the value or price of an investment in sterling terms if it is denominated in a foreign currency.
Information is based on our understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation are subject to change.
Tax treatment is based on individual circumstances and may be subject to change in the future.
Other Insights of interest
26th January, 2021
Property Market Review – January 2020
Sustainable buildings – property developers tune in Savills’ most recent review of the UK commercial… Read full insight
26th January, 2021
Residential Property Review – January 2020
Momentum in residential market expected to slow The UK residential property market closed 2020 with… Read full insight
18th January, 2021
Your resolution for 2021 – become acquainted with your pension age(s)
Last October, phased increases to the State Pension age (SPA) reached 66 for both men… Read full insight
13th January, 2021
End of tax year planning 2021
With the end of the tax year (5 April 2021) approaching, now is an opportune… Read full insight