Consumers welcome timely boost to ISA compensation rules

Almost two-thirds of consumers support the recent increase in the compensation limit for cash ISAs to £85,000, new research from the Financial Services Compensation Scheme (FSCS) shows. The new limit is supported by 63% of those questioned.

Prior to 31 December 2010 cash ISA savers could only keep £50,000 with one provider and be guaranteed they would get all their money back if it went bust.

The new rules are timely as calculations by the FSCS show that an individual who deposited the maximum annual amount in their cash ISA each year since the introduction of ISAs in April 1999 would now have £48,511.69. Their deposits of £39,300 have been topped up by £9,454.25, with the benefit of compound interest, based on the base rate in April each year.

The FSCS is the UK's statutory compensation scheme for customers of UK authorised financial services firms. Since 2001 it has paid more than £24 billion in compensation when financial services firms, such as Icesave, have gone bust and left people out of pocket. The FSCS protects insurance, investments and deposits - including ISAs.

Mark Neale, Chief Executive of the FSCS, said: "The new rules increase the protection available to ISA savers and so it is no surprise they have strong public support. Even though a relatively limited number of people will be directly affected at the moment, the increase provides peace of mind for the millions who have ISA savings.

"The increase will help those who have been able to put away the maximum limit into a cash ISA each year. They will be able to keep their money in the same ISA and avoid having to start a new product in order to stay within the limit."