For personal injury claimants and their representatives, one of the key priorities immediately following receipt of a significant lump sum award of damages into a bank account, whether this be an interim award or a final settlement, is making sure that the capital is protected as fully as possible.
The Financial Services Compensation Scheme (FSCS) currently protects deposits up to a maximum of £85,000 per individual, per bank or bank/building society.
Additionally, since 2015, the FSCS has provided enhanced protection for ‘Temporary High Balances’ credited to a depositor’s account.
The FSCS lists a number of events that may give rise to a Temporary High Balance:
- Real estate transactions (property purchase, sale proceeds, equity release – relating to your main residence only. This doesn’t have to be a UK property but must relate to your main residence).
- Benefits payable under an insurance policy.
- Personal injury compensation.
- Disability or incapacity (state benefits).
- Claim for compensation for wrongful conviction.
- Claim for compensation for unfair dismissal.
- Redundancy (voluntary or compulsory).
- Marriage or civil partnership.
- Divorce or dissolution of their civil partnership.
- Benefits payable on retirement.
- Benefits payable on death.
- A claim for compensation in respect of a person’s death.
- Inheritance.
- Proceeds of a deceased’s estate held by their personal representative.
The enhanced level of protection for temporary high balances begins from the date the sum is credited to the individual’s account, or to an account on the individual’s behalf (e.g. a solicitor’s client account), and lasts for a period of 6 months.
Most temporary high balances are protected up to a maximum of £1,000,000. However, balances in respect of personal injury compensation benefit from unlimited protection.
This enhanced level of protection is highly beneficial for personal injury claimants and their representatives, who often need time to make important long-term financial decisions following settlement.
Interim Payments
During the process of a personal injury claim, an interim payment might be made to a claimant. Such a payment, if in excess of the standard FSCS protection limit of £85,000, would be classed as a temporary high balance and would therefore benefit from unlimited protection for a period of 6 months, as described above.
There is a common misconception that once the ‘6 month clock’ has started, following receipt of the interim payment, this same ‘clock’ will apply to any further payments received in respect of the claim, including any final settlement made. In other words, if a final settlement sum is paid to a claimant more than 6 months after an interim is paid, temporary high balance protection will not apply.
Fortunately, this is not the case.
Temporary high balance protection applies to each payment as it is made, regardless of whether multiple payments are in connection with the same claim, and each temporary high balance benefits from its own ‘6 month clock’.
As an example, assuming a case in which two interim payments are made seven months apart, followed by a final settlement over a year later, the following illustrates the level of protection provided each time a payment is made:
| Payment | Date Paid | Amount | Level of Protection | Duration of Protection | Expiry of Protection |
| Interim | 1st Feb 2022 | £100,000 | Unlimited | 6 Months | 31st Jul 2022 |
| Interim | 1st Sep 2022 | £150,000 | Unlimited | 6 Months | 28th Jul 2023 |
| Final | 1st Nov 2023 | £1,000,000 | Unlimited | 6 Months | 30th Apr 2024 |
Temporary high balance protection will therefore provide claimants and their representatives with reassurance that each compensation payment as it is made will be protected, in full, for a period of 6 months.
The Prudential Regulatory Authority’s full Statement of Policy in respect of the FSCS Deposit Guarantee Scheme can be found here (specifically, information regarding Temporary High Balance protection can be found at point 5, page 8) >> Deposit Guarantee Scheme (bankofengland.co.uk) ).
Expert financial advice in high value cases is inherently complex. There are many aspects of such cases where expert help is a necessity. It is not as simple as it might first appear.
For an experienced, impartial view on the investment of lump sums, periodical payments, personal injury trusts, and entitlement to state benefits, please telephone one of our specialist advisers on 0800 082 1216. We will be happy to have a no obligation discussion, or e-mail us at: PICOP@chasedevere.co.uk or visit our website at www.chasedeverepicop.co.uk
Content correct at the time of writing.