In the UK, the Financial Service Compensation Scheme protects cash deposits up to £85,000 per person and up to £170,000 for joint accounts. As a result of the economic instability caused by the Coronavirus, on the 6th August 2020 this protection was temporarily increased to a 12 month period for a limited time of 6 months. This also applies to existing protection from February 2020, that’s due to expire in August. The Prudential Regulation Authority (PRA) decided to implement this as reassurance to individuals during these uncertain times, as banks and building societies have reduced staff numbers, hence making them difficult to access.
Such increase in protection, applies to failed deposits after significant circumstances like inheritance, redundancy, property sales and divorce. The temporary high balance protection started in 2015, as part of the European Deposit Guarantee Scheme directive, as long as there was evidence of a valid reason for change in means.
The Financial Reporter quoted Caroline Rainbird, Chief Executive of FSCS saying “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.”
However, this is not fantastic news for all. Some financial advisers argue that their services will inevitably become more expensive, as the fees against the company will increase. The ripple effect, will have a negative impact on individuals who will be priced out of affording personalised financial advice.
Going forward, financial advisers will need to think of new ways to make their services more beneficial to their clients. One way of doing this is by using services like Akoni, which allows users to diversify their deposits across bank accounts easily and maximise the FSCS protection, whilst earning interest on their cash.
About Akoni: Akoni is an award-winning UK cash platform, which provides a marketplace to SMEs and charities, as well as to individuals through our white label distribution partners including IFAs, wealth platforms, accountants and SME hubs. Akoni uses innovative technology to personalise cash planning solutions for clients, and also provides a full API solution to banks and insurance clients.