Following the Northern Rock liquidity crisis, the financial services regulator has introduced changes to compensation arrangements. The previous limit for depositors’ eligible compensation claims was £31,700, which was broken down to 100 per cent for the first £2,000 and 90 per cent of the next £33,000.
However, with effect from today, 1 October 2007, this has been changed to 100per cent coverage for depositors with accounts upto £35,000.
Our view
These changes are designed with the consumer in mind to give them confidence that their savings and deposits are safe and secure. We do not believe they go far enough. For example, if you have £1m in a bank account and £1m in an Insurance Company investment. The following compensation would be available in respect of insolvency:
Bank deposit compensation on £1m loss = £35,000
Insurance investment compensation on £1m loss = £900,000.
Need we say more? In short, never have more than £35,000 invested in any one bank or building society.
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