Savers still in the dark over new compensation limit

The Financial Services Compensation Scheme (FSCS) is due to raise the level of protection on consumers' savings in less than a month, yet almost 60 per cent of Brits are unaware of the impending changes.

A poll by moneysupermarket.com reveals over half of consumers (52.2 per cent) know the current compensation limit, but are unaware it is changing. Encouragingly though only six per cent do not know the current level of protection available, which shows how consumer attitude has changed.

The FSCS currently offers a lower level of compensation than other European schemes with only the first £50,000 (£100,000 for joint accounts) protected should a bank collapse. However from the 1st January 2011, UK savers will receive protection in line with other European depositor schemes (€100,000) which will be fixed at £85,000 for the next five years (£170,000 for joint accounts).Kevin Mountford, head of banking at moneysupermarket.com, said: "The amount of protection savers are entitled to became a huge issue during the banking crisis and any increased protection for UK savers should clearly be considered great news, especially as savers struggle to find good returns in a low base rate environment. This should also boost consumer confidence throughout the European market.

"It's also encouraging to see over 40 per cent of people are aware the scheme is changing and this is surely a sign that an ever increasing number of British consumers are starting to engage with their finances. However, with almost 60 per cent of people unaware of the changes and a further 12 per cent unsure of the new limit, the FSCS has a lot more work to do in terms of bringing the nation up to speed over the coming months. However, awareness of the scheme is still extremely high, with only six per cent of consumers saying they don't know about it, which I have no doubt is due to the Icelandic banking crisis and other financial disasters closer to home.

"Until January 1st, consumers with over £50,000 in the bank should ensure their money is spread between accounts, taking care to avoid using two products from the same provider - as only £50,000, or £100,000 for joint accounts, is protected within each institution. It's important savers check which banking group their accounts sit with, as two seemingly distinct providers might fall under the same banking umbrella. For example, First Direct is owned by HSBC, meaning any customer who has money saved with both providers will only be protected up to £50,000."