Prudential Regulation Authority Rulebook

50.ZA.

Depositor Protection 4.4 sets out that if a joint account holder dies and the share passes automatically to another depositor and they, or individuals under a trust, have a relevant beneficial entitlement, the FSCS protection limits of the surviving entitled individuals is increased by an amount calculated by dividing between them the limit applied to the deceased account holder at the date of death. This means that if the deceased account holder was subject to a THB at the date of their death, the survivors would, between them, benefit from that THB protection for a period of 6 months from the date of death. Where joint account holders are trustees, the general FSCS principles for trustees apply. 

50.ZB.

The temporary increases to maximum compensation sums that apply when a joint account holder dies apply for six months beginning with the date of death.

50.ZC.

The examples below illustrate this temporary increase to the maximum compensation sums.

Examples:

1. (a) There is a joint account holding £170,000 with two individual account holders. There are no THBs, so each individual has the benefit of £85,000 FSCS protection. One of the account holders dies, the surviving account holder has their FSCS protection limit temporarily increased by £85,000 giving them £170,000 of FSCS protection.
2. (b) There is a joint account holding £2 million with two individual account holders. The deposit is a result of a THB event that is subject to a £1 million limit for each individual. One of the account holders dies, the surviving account holder has their FSCS protection limit temporarily increased by £1 million giving them £2million of FSCS protection. 
3. (c) There is a joint account holding £500,000 with three account holders. All three are co-trustees and the funds in the account are held on a discretionary trust that has not vested. There are no THBs in the account, so the trustees (treating co-trustees as a single person) have £85,000 FSCS protection. This remains so after one of the trustees dies, as the other trustees are still considered a unit for FSCS purposes.
4. (d) There is a joint account holding £500,000 with three account holders, all three are co-trustees, however, one of the trustees also has an individual absolute beneficial entitlement. The trust has four other beneficiaries, who are not depositors, each with an absolute entitlement to part of the funds in the account. There are no THBs, so each individual with an absolute beneficial interest benefits from £85,000 THB protection. The account holder who is a trustee also with an individual absolute beneficial interest dies and their FSCS protection limit is shared between the four beneficiaries with the result that the beneficiaries have their FSCS protection limit temporarily increased by £21,250 giving them each £106,250 FSCS protection.
5. (e) The situation is as in (d), except that a trustee and two of the beneficiaries have an absolute beneficial entitlement, and the trust is discretionary in relation to two other beneficiaries. The trustee who also has an absolute beneficial interest dies. Their £85,000 protection limit is shared between the two beneficiaries with an absolute entitlement and the two co-trustees (treating co-trustees as a single person), by virtue of there also being individuals with unvested beneficial interests. Each share of the temporary increase is therefore £28,333.33. This results in the two beneficiaries with an absolute beneficial entitlement and, on behalf of the discretionary trust, the co-trustees (treating them as a single person), each having £113,333.33 FSCS protection.