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Savers should get a safety net of up to £500,000 if their bank or building society collapses, in a move that would inspire more confidence in the financial system. Raising the maximum compensation sum from £50,000 to half a million pounds would protect those who use accounts for inheritance, pensions and property sales. Issuing the proposal, the Financial Services Authority said the additional protection should be available for only six months to savers forced to stash high amounts. These amounts may derive from redundancy pay or a divorce settlement, or other lump payments which need to be stored before they can be diversified, the FSA said. Currently, if a bank or building society goes bust, the Financial Services Compensation Scheme will repay each saver £50,000, up from £35,000 last year. “Our proposals will protect people who have little or no choice about holding a high balance for a limited period,” said FSA banking director Thomas Huertas. “This change would contribute to the banking reform objective of providing effective compensation arrangements in which consumers have confidence.” For the proposal to be introduced, UK ministers must negotiate an exemption from a European Union directive that gives single deposit protection of €100,000 across the EU from the end of 2010. The FSA said: "If a common fixed upper limit of this kind is adopted, the UK will not be able to have higher protection for temporary high balances unless it is agreed at EU level that an exception should be made." Apr 2, 2009 Email this article Printer friendly page Previous Page
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