Advance Warning to UK Savers

[Colwyn]

Since the financial collapse of 2007/8 a government-backed guarantee for most UK savers has covered the first £85,000 of UK savings (one of the many excellent things introduced by Gordon Brown as Chancellor). From 1 Jan 2016 this will be reduced to £75,000. So if you have £85k invested in one bank (£170k for a joint account) then the last £10k (£20k) will be lost if your bank goes bust. I'll be moving £10k out of my account and putting it somewhere else - and I'll be doing it soon since it is on 3 month notice. If you are on 6 month notice you are already too late to get the withdrawal processed in time for the 1st on January.

[sadler]

Colwyn, I recently read that this was originally an E.U. Policy and the amount guaranteed by banks was 100,000 euros, which at the time equated to £85,000. The reduction to £75k is to make allowance for the weakening strength of the euro against the GBP. Was I misinformed?

[usedbustickets]

Top Tip Colwyn

[savoyboy]

Wish I had such money worries !

[Colwyn]

Colwyn, I recently read that this was originally an E.U. Policy and the amount guaranteed by banks was 100,000 euros, which at the time equated to £85,000. The reduction to £75k is to make allowance for the weakening strength of the euro against the GBP. Was I misinformed?

As I recall things, Brown was the first to raise the 100% guarantee limit to £50k which was then followed by other EU countries at equivalent Euro rate - partly under the exhortation of Brown. The raising of the limit to £85k/€100 happened later and I fancy they happened together. But I haven't had time to check this. Might get back on this later.

The change to the rate does indeed come from the EU - specifically the "European Union Deposit Guarantee Schemes Directive" that sets rates across the EU (not just EZ).
http://www.fscs.org.uk/news/2015/july/new-deposit-protection-limit-coming-on-1-january/

P.S. Of course Osborne doesn't have to cut the guarantee to savers to £75k. Indeed he could raise it in line with inflation. As long as it is at least as much as €100,000 that's OK. But that's not his priority. Instead he has put in special rules for those holding up to £1 million in a bank. Oh good.

Edited in line with Stoop's comment #6 - below.

[stoop]

The special rules are for those in the middle of lifestyle changes such as divorce settlements and house sales. Not those with £1m sat in the bank for no reason. That's a good thing surely?

As far as increasing it above the €100k are you sure he can legally do this? Surely it would attract money from other EU countries who stick with the agreed limit? That wouldn't go down well with our EU masters would it?

[stoop]

From a Telegraph reader:

"Previously I would say you are correct but the EU are moving more and more towards zero flexibility presumably as part of ever closer union. I have had the misfortune to spend months poring over this directive, and it is a maximum harmony directive. Hence the lack of wiggle room for the UK government. The only variability is a maximum of plus/minus EUR 5,000 to allow for a sensible round amount when converting the deposit guarantee of EUR 100,000"

[Colwyn]

Thanks Stoop, I hadn't realized this. From minimum standards to "maximum harmony", eh? Hmm.

[stoop]

Lol.
Me neither. I learn something every day. Tomorrow it's shoe lace tying  

[Colwyn]

I wonder how the Greeks feel about EU inspired "harmony". When all their banks go bankrupt where will the Government find the money to pay out all the citizens who have lost out? Perhaps it will borrow it from German banks which don't care who they lend to as long as taxpayers bail them out when the borrower can't repay.