Falling sterling could mean more of your savings are protected

Emma Haslett
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Don't smash that piggy bank quite yet - up to £85,000 of savings could be protected from next year (Source: Getty)

Savers have been pretty heavily punished by rock-bottom interest rates in recent years - but now the Prudential Regulation Authority (PRA) wants to make things a little easier, by raising the protection it offers to savers.

At the moment £75,000 of your savings are protected under the deposit protection limit, meaning if your bank fails you can get the money back.

However, the PRA said today it is considering raising that to £85,000 from next year - thanks to the falling pound.

Sterling has fallen 11 per cent against the euro and almost 17 per cent against the dollar since the EU referendum in June.

But while the Brexit vote might be the cause, it's a European Union rule the PRA is acting on: the Deposit Guarantee Schemes Directive (DGSD) requires states to adjust the deposit protection limit following "unseen events" such as currency fluctuations.

If the PRA's plans do come into effect, the deposit protection limit will be raised on 30 January, with a five-month transitional period for lenders to implement the new limit.

Back to where we started

If the change comes into effect, savers will essentially be back where they started - in January this year the EU cut the deposit protection limit €100,000, or £75,000 - from £85,000 the year below.

The limit was raised several times during the financial crisis - this year was the first time it has been cut.

Experts warned savers to ensure their money was protected.

“[The government] was left shouldering a heavy load after the last financial crisis," said Hannah Maundrell of money.co.uk.

"We can’t rely on them to bail out any bank, building society or credit union that fails again, so you need to make sure your money is fully covered by the Financial Services Compensation Scheme.”

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