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Temporary saver protection could be increased tenfold

The Financial Services Authority has today tabled a motion which could effectively see a temporary increase in saver protection limits from £50,000 to £500,000. While the move has not been ratified as yet it seems likely we will see the introduction of short-term protection for those who have sold a large asset such as a home. How long the extended protection would last remains to be seen but it appears to be a good response to the problems encountered by many who have sold large assets over the last 12 months.

While under normal circumstances the Financial Services Compensation Scheme would not register on many radars, the ongoing economic downturn has highlighted the limited protection afforded to savers in the UK. The FSA has suggested that the additional cost of a potential £500,000 protection limit would be between £240 million and £1.5 billion if a significant bank was to fail - a cost which would need to be met by the banking industry itself.

It is estimated that if the proposals were followed through then we would see 95.5% of home sales in the UK protected by the expanded protection. Whether this will make any significant difference to confidence in the UK banking and property markets very much remains to be seen.

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