MOST savers would prefer a higher interest rate on their money rather than a higher level of protection from the government’s financial compensation fund, according to research from RateSetter.
The Financial Services Compensation Scheme (FSCS) currently protects up to £75,000 of deposits held in a bank or building society. From next Monday, this will increase to £85,000.
However, according to the survey commissioned by the peer-to-peer lender, only four per cent of people in the UK have more than £75,000 in savings and therefore stand to benefit from the increase in protection. 67 per cent of people have £10,000 or less in savings.
Asked whether they would prefer to have more protection on their savings or earn a higher rate of return, the vast majority of savers favoured the latter, with 69 per cent saying they would rather earn one per cent more in interest than have an extra £10,000 of FSCS protection.
Read more: Long-term savings rates hit an all-time low
“While the FSCS tinkers around yet again with the level of protection it provides, it is abundantly clear that what people really want is better returns on their savings,” said Rhydian Lewis (pictured), chief executive and co-founder of RateSetter.
“With record low returns on savings that can’t even match inflation, it’s no wonder that more people are deciding to put some of their money to work, by accepting some risk in exchange for a higher rate of return.”
Read more: Why investments are the new savings
P2P investments are not currently covered by the FSCS. However, last month the Financial Conduct Authority announced that it had undertaken a wide-sweeping review of the scheme and was seeking views on whether P2P lending should be covered by the fund.
If P2P were included under the FSCS, it would mean that investors could seek compensation if a P2P platform went into default.
At the moment, the main aspect of P2P that is covered by the scheme is client money when it is held in a third-party account, such as a bank, before being invested.
Read more: FCA to toughen rules on P2P