The Financial Services Compensation Scheme (FSCS) has extended its protection for savers amid concerns that the pandemic has increased the likelihood of financial firms failing.
The fund currently protects deposits with UK banks, building societies and credit unions to the tune of £85,000 per person. However, there is additional protection for consumers who temporarily have high balances of up to £1m. Having such a large balance for a relatively short period of time could be unavoidable for reasons such as a house sale, divorce settlement, insurance payout or redundancy.
These temporary high balances are normally protected for six months and the FSCS would automatically pay compensation if the financial institution failed. From 6 August 2020, the FSCS has extended its coverage to 12 months, with the scheme reverting to a six-month cover period from 1 February 2021.
The FSCS has introduced the temporary extension due to 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.