Author James Tanswell DipFA 23/09/2015

Changes to a government regulation scheme mean that people with large amounts of savings could be at increased financial risk from next year. It's a good opportunity to review your finances and check your risk and reward ratio meets your needs.

The changes, which take effect on 1 January, are to the Financial Services Compensation Scheme. That's an industry-wide scheme by which a set amount of a customer's savings are guaranteed against bank or building society failure, with the government picking up the tab if necessary.

 At the moment the limit is £85,000. It's falling to £75,000 because of European Union rules which make sure the limit is the roughly the same across all member states: namely a close equivalent to €100,000. Every five years there's a recalculation and the falling value of the Euro on currency markets has prompted the change to the UK limit.

 There are a few key conditions to remember about the scheme:

• The limit doesn't apply to a specific account or even a specific bank or building society. Instead it covers each set of savings across any institutions sharing a single banking licence, for example Bank of Scotland and Halifax. You can check the various combinations athttps://www.savingschampion.co.uk/advice-guides/guides/fscs-licence-information/
• • The limit is per person, so a couple could have £150,000 protected in a joint account.
  • The limit is reduced to £50,000 for investments with brokers or fund managers.
  • A new rule that took effect this year means you get protection for a further £1 million for money that's temporarily in your account because you've sold or are buying property, or for similar reasons. The increased limit applies for up to six months.

 As for the action to take now, the key is that anyone with more than £75,000 in savings should check the breakdown between different banking groups and check whether they exceed the compensation limit or will do so after the limit is reduced in January 2016. If that's the case, one option is to move money into an account with a different bank (and a separate banking license) to continue to get the maximum protection.