Under the old rules, everyone with a bank account that was approved by the government would automatically have their savings protected by the treasury. This was designed to prevent people losing their savings if the bank that they were holding the money with were to go bust. The old rules stated that the government would compensate any loss that you suffered, up to the value of £85,000 per person per account.
However this will now be reduce to £75,000 for people who hold single accounts, and people who hold joint accounts will see their protected sum fall from £170,000 to £150,000. European Union rules stipulate that the maximum amount of protection that a government is allowed to give out in the case of a bank going bust is Ä100,000. This new change has been brought about because of the fact that the pound has strengthened against the euro in recent times.
The exact rate that was taken was determined on 3 July 2015.
One conservative MP said that the rule was "defective".
According to the Financial Services Compensation Scheme (FSCS), even though around 95% of savers will still be covered, there around 2.5 million people who now may not be. It has now sent out numerous pleas for people to make themselves aware of the changing rules so that they can take the necessary steps required to be able to make sure that they do not leave themselves at risk. They advise people to move some of their savings into accounts with separate banks if they have more than £75,000 being held by one organisation.
Even this is made fairly complicated due to the fact that there are many banks that are actually owned by the same banking groups, even though they operate under different brand name- HSBC and First Direct are one such example. The scheme is set pup in such a way that you must have your money saved with different banking groups, not just different brands, in order to make sure that your money is protected by the government.
It is worth noting that even though Nationwide and Royal Bank of Scotland are "sister" banks, they were registered separately and as a result are not classed as the same organisation.
The editor of a financial news website, Hannah Maundrell, said:
"While this should be quite simple to navigate, it's made complicated by the fact that FSCS cover is shared between banks that operate under the same licence."
For a full list of all the different banks included in the scheme, in addition to information about which banks are classed under the same organisation, please head to FCA 's website.
The new rules also allow people to have their money protected up to £1m if the money has come about as a result of a temporary situation. An example of this would be selling a house or receiving a severance package for being made redundant.
The compensation only applies if the individuals had not had the money in their accounts for more than six months.
People should also be aware of the fact that there are several banks in the UK that are actually registered within the Eurozone- one example of which is Handelsbanken. Handelsbanken have stated that the amount of money that people received in compensation would depend upon the exchange rate between the euro and the pound at the time.
When this article was written, that would have meant an upper limit value of under £74,000.
Savings insight manager at a leading financial website, Rachel Thrussel, said:
"With an increasing number of European banks now offering competitive rates, customers need to be aware that not all savings accounts offered in the UK are covered by the UK compensation scheme."