The majority of us are aware of the Financial Services Compensation Scheme (FSCS), which provides protection for consumers in the event that a financial services firm fails. The normal cover limit provided is £85,000 per person per financial services firm and protection applies to monies held within banks, building societies or credit unions that are regulated by UK regulators the FCA and PRA.
But did you know that deposit payments up to £1 million that are made in connection with certain events are also covered under the scheme’s ‘temporary high balance’ rules?
Introduced in July 2015, the extended protection was brought in to standardise the protection of money held in banks, building societies and credit unions across the EU. Under the temporary high balance rules, deposits over £85,000 are protected for up to six months from when the amount was first credited.
The types of ‘event’ that are covered under the scheme include:
- Real estate transactions (property purchase, sale proceeds, equity release) relating to a depositor’s main or only residence
- Benefits payable under an insurance policy
- Personal injury compensation (unlimited amount)
- Disability or incapacity (state benefits)
- Claim for compensation for wrongful conviction
- Claim for compensation for unfair dismissal
- Redundancy (voluntary or compulsory)
- Marriage or civil partnership
- Divorce or dissolution of their civil partnership
- Benefits payable on retirement
- Benefits payable on death
- A claim for compensation in respect of a person’s death
- Proceeds of a deceased’s estate held by their Personal Representative
Whilst the standard £85,000 cover under the FSCS is widely known, this additional ‘temporary high balance’ protection has gone under the radar of many. However, it can actually apply in many situations. When in receipt of a settlement, proceeds from a property sale or another windfall, it’s important not to rush into making any decision. The temporary high balance cover provides peace of mind and space to think about what you want to do with your money.
For more details of the rules and how they apply, visit the FSCS website.