More than eight in ten people (83 per cent) are unaware that the protection provided for savings by the Financial Services Compensation Scheme (FSCS) will fall by £10,000 to £75,000 on 1 January 2016, according to research from peer-to-peer lender RateSetter.
The FSCS, launched in 2011, guarantees the safety of savings kept in banks and building societies up to a limit of €100,000, to match the guarantee offered in the EU, and the UK limit is falling following the decline in the value of the euro relative to the pound. RateSetter’s research shows that the public awareness of the level of protection provided by the FSCS is declining and many people overestimate its ability to protect them.
Nearly four in ten people (37%) said they did not know what level of protection the FSCS provides – a significant increase from a quarter of people (26%) who said this nine months ago. A third (34%) believe that rules around the FSCS are confusing.
One in six people (16%) mistakenly believe that the FSCS protects their money against the pressures of inflation and nearly one in ten (8%) thought the FSCS currently provides protection for more than £85,000.
“With the reduction in the FSCS limit just 100 days away, the clock is ticking. Anyone in the fortunate position of having more than £75,000 in savings will want to use this time to take a good look at whether their money is appropriately allocated”, commented Rhydian Lewis, CEO at RateSetter. “For many people, that might mean splitting savings between different banks and building societies. But some investors have told us that lower FSCS protection will prompt them to seek a better return on money above the new limit – and perhaps this is one of the reasons why we’re seeing increasing levels of investment in peer-to-peer platforms such as RateSetter.”
Interest in peer-to-peer lending has continued to grow in the two months since the change to the FSCS limit was announced: the number of people investing on RateSetter’s platform has increased by 7%, and the average account size has increased by 3%, to £20,530.
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