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Savings to get better protection

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Savers are soon to enjoy a higher level of protection should the bank, building society or credit union which holds their money go under.

At the moment, the first £50,000 of savers’ funds are safeguarded if a financial institution fails. That level was set in 2008, following the meltdown in the banking industry.

But as from 1 January 2011, the compensation ceiling will be lifted to the equivalent of 100,000 euros (around £84,450).

The change is due to new European legislation.

It will mean that savers are entitled to compensation of 100,000 euros (or the sterling equivalent) within 20 days of any loss as a result of a bank failing.

Back in 2007, only the first £2,000 and 90 per cent of the next £33,000 of savings were protected against the collapse of a bank or building society.

In October 2007, the compensation figure became 100 per cent of the first £35,000 per customer, which, in turn, was raised to £50,000 per customer during the banking crisis.

The exact amount in sterling to be covered by the new level has yet to be set, but, once it is decided on, it will probably be reviewed should there be any large-scale shifts in the pound-euro exchange rate.