The Financial Services Compensation Scheme (FSCS) has warned that the new ISA limit will push people over the threshold of the scheme much faster than before.
In last month’s Budget, chancellor George Osborne announced the introduction of a New ISA (NISA) from July this year with a tax free limit of £15,000, which can be held either in stocks or cash.
The FSCS has warned that this means savers will reach the scheme’s limit of £85,000 much faster than previously. Any savings held with institutions covered by the scheme are protected up to this amount if the bank goes bust. Couples with a joint account are protected up to a total of £170,000.
Update: From 1 Jan 2016 the FSCS compensation limit has reduced to £75,000 – please see this page for details.
Someone who already has £66,000 held in ISAs, consolidated under one institution, would breach the limit this year if they added a further £15,000 in July. This would mean that anything over the limit would not be protected if the bank collapsed. Those putting their savings into an investment ISA would reach the limit even faster, as the FSCS only protects investments up to a total of £50,000.
Mark Neale, chief executive of the FSCS, said:
“The new £15,000 limit for Nisas does mean that anyone who is able to put away that amount each year, especially those with some savings already, will reach the FSCS protection limit much faster than in the past if all their savings are held with the same provider.”
It is important to remember that multiple banks can be held under the same institution, and the £85,000 limit applies per person, per institution - not per bank. Anne Bowes of SavingsChampion.co.uk said:
“Remember that all savings are lumped together as far as the FSCS is concerned, whether it is standard savings accounts or ISAs.
“So savers need to be vigilant and make sure that they are aware if they have more than the FSCS limit with a provider, remembering that some brands are linked.”