Changes to the Financial Services Compensation Scheme (FSCS)

Changes to the Financial Services Compensation Scheme (FSCS)

 

On 3 July 2015, the Prudential Regulation Authority (PRA) announced that from 1 January 2016, the level of FSCS protection for personal and small business depositors will be reduced from £85,000 to £75,000. This limit applies to a customer’s total deposits held with Ulster Bank Limited.

Summary of key changes

 

  • For individuals and small business depositors, the change to the compensation limit will take effect on 1 January 2016. This means that until 31 December 2015 these customers will continue to be protected up to £85,000.
  • The change to the limit took immediate effect for large companies and small local authority depositors, who are new to the scheme. These customers are therefore protected up to £75,000 from 3 July 2015 onwards.
  • Until 31 December 2015 individuals and small business depositors who have balances of more than £75,000 with Ulster Bank Limited will be able to reduce their balances by up to £10,000 without incurring an Early Closure Charge or loss of interest (including fixed Money Desk Deposits and bonds “structured deposit”). For example, if your total balance across deposit holding products is:
    • £79,000 - you will be able to withdraw up to £4,000
    • £85,000 - you will be able to withdraw up to £10,000
    • £115,000 - you will be able to withdraw up to £10,000 and any further withdrawal will be subject to the Early Closure Charge associated with the relevant product(s).
    • £74,999 or less – Customers wishing to withdraw funds early from a Money Desk Deposit or bond “structured deposit”, would incur an Early Closure Charge in line with the terms of the account.
  • The compensation limit, and the right to withdraw excess funds above the limit free of Early Closure Charge or loss of interest applies to money held in:
    • All Current Accounts
    • All Savings Accounts – including instant access ISAs, Fixed Term ISAs, and Money Desk Deposits, Eligible Business Savings accounts
    • Eligible bonds “structured deposits”,

 

What does this mean to me?

This change will not affect the overwhelming majority of customers, who will continue to be fully protected under the new deposit protection limit. Individuals and small business depositors will continue to be protected up to £85,000 until 31 December 2015 so have time to adjust their balances to stay within the new limit, if they wish to do so. If a customer has more than the new limit from 1 January 2016, some of their money may be at risk if the bank fails.

What is the impact on joint account customers?

The FSCS limit applies to each depositor. This means that if a customer only holds joint accounts, their level of cover will reduce from £170,000 to £150,000 (i.e. £75,000 per individual) per bank, building society or credit union from 1 January 2016.

How much can I withdraw due to the changes in the cover in the FSCS deposit scheme?

Customers can withdraw up to £10,000 (£20,000 for a joint account) to reduce their balance below the new £75,000 protection limit. Customers can withdraw monies from either a current account, an instant access savings account or fixed term product or from a combination of these accounts. When withdrawing monies from a current account or an instant access savings account, the normal process in branch or on Anytime Internet Banking applies. Where monies are being withdrawn from a fixed term product (i.e. Money Desk Deposit, Fixed Rate ISAs or bond “structured deposit”), a withdrawal request will need to be completed in branch. Depending on the combined total of balances held with Ulster Bank Limited, up to £10,000 (£20,000 for a joint account) can be withdrawn without incurring an Early Closure Charge or loss of interest.

In the meantime please see examples below to help explain.

 

Example scenarios – where customer more than £75,000 with Ulster Bank Limited

Sole Accounts:

Balance in a fixed term product are:  

You can withdraw

Total balances covered from 01/01/16

£79,000

Able to withdraw up to £4,000 with no Early Closure Charges or loss of interest

£75,000

£85,000

Able to withdraw up to £10,000 with no Early Closure Charges or loss of interest

£75,000 

£115,000

Able to withdraw up to £10,000 with no Early Closure Charges or loss of interest and any further withdrawal will be subject to any Early Closure Charges associated with the relevant product(s).

£75,000

 

Joint Accounts:

 

Balance in a fixed term product are:  

You can withdraw 

Total balances covered from 01/01/16 

£158,000 

Able to withdraw £8,000 with no Early Closure Charges or loss of interest i.e. £4,000 each

£150,000 

£170,000 

Able to withdraw £20,000 with no Early Closure Charges or loss of interest i.e. £10,000 each

£150,000 

£230,000 

Able to withdraw £20,000 with no Early Closure Charges or loss of interest i.e. £10,000 each

£150,000 

 

How to withdraw funds if you have over £75,000 deposited with Ulster Bank Limited

 

  • You can withdraw funds from an instant access savings account or current account at any time by simply visiting your local branch or logging into Anytime banking and transferring your funds to another bank or building society.
  • You can withdraw funds from a fixed rate account or limited access product (for example: Money Desk Deposit, Fixed Rate ISA or Bond “Structured Deposit”) from 1 October 2015 until 31st December 2015, by visiting your local branch.
  • The FSCS Withdrawal Request Form needs to be completed, detailing from which account(s) the withdrawal request covers. When completed hand the form into your nearest branch for processing.

 

Structured Deposits

On 3 July 2015 the Prudential Regulation Authority (PRA) announced that, from 1 January 2016, the level of FSCS protection for personal and small business depositors will be reduced from £85,000 to £75,000.

This limit applies to a customer’s total deposits held with Ulster Bank, including bonds ‘structured deposits’. So if you hold a bond “structured deposit” with Ulster Bank, the FSCS limit change may impact you.

In line with the FSCS protection limits conditions set by the PRA, if you hold deposit balances of over £75,000 with Ulster Bank, you can opt to make one partial encashment of up to £10,000 to bring your total exposure within the £75,000 limit. (If your total deposit balance with Ulster Bank is between £75,000 and £85,000, the maximum partial encashment you can take is the balance over £75,000.) Any future gain in value of the bond will count towards this limit and may result in you exceeding it.

 

How do I make a partial encashment?

You must go to your branch and present or complete in branch, an FSCS Withdrawal Request Form, detailing the account(s) the withdrawal is to be made from You will not be charged any early encashment fees for redeeming part of your bond. However, due to the nature of structured deposits, the amount that we will return to you will reflect current market conditions such as interest rates.

When you originally took out your bond, each sterling pound invested had a value of £1. During the term of your bond, the realisable value changes and may at any time before maturity, be higher or lower than £1. This means that, in order to reduce your FSCS exposure by up to £10,000, the proceeds of the partial encashment for your bond could be more or less than the requested withdrawal, depending on the realisable value at that time. When your bond matures, the value will be at least £1 per £1 invested.

If you decide to make a partial encashment, we will tell you what the current indicative realisable value is and calculate based on a maximum exposure reduction of £10,000.

If you decide to make a partial encashment from a bond that is held in an ISA, then the monies redeemed will be transferred to your ISA demand deposit account.

You can request the latest realisable value by calling the number below. This may help you to decide what course of action to take, if any. Please note that our staff cannot give you any advice. If you need advice as to what you should do, please speak to an authorised Financial Adviser. If you don’t have an authorised Financial Adviser, you can search for one here: www.unbiased.co.uk

If you hold a non-ISA Bond and you’re a UK tax-payer we’ll deduct income tax at the basic rate (20%) from any gross interest included in the encashment value. This means you’ll get back a net interest payment. Higher and additional rate taxpayers will need to declare this interest payment on their tax return.

Contact Details

If you hold deposit balances over £75,000, meet the conditions that the PRA have set and would like to make a partial encashment, please call us on 028 9027 5795

Other Important Information

Further information will be displayed here shortly or you can contact the FSCS at:

 

We are here to help

If you want to discuss these changes further you can talk to us in your local branch or contact us by calling 0800 158 8786*

* Call costs from networks may vary. Calls from mobile phones may not be free.

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