UK bank customers will benefit from increased protection for their money in the event of a financial provider’s failure, as new regulations take effect. Starting December 1, individuals will have up to £120,000 of their funds refunded if a UK-authorized bank, building society, or credit union becomes insolvent. This new cap surpasses the previous limit of £85,000 that had been enforced since 2017.
The enhanced protection falls under the Financial Services Compensation Scheme (FSCS) and was officially raised by the Prudential Regulation Authority (PRA) today. This compensation limit is applicable per person, per authorized firm, and is typically reimbursed automatically within seven days of the firm’s collapse.
In cases where an individual holds funds across multiple accounts with banks sharing the same banking license within a banking group, the compensation limit applies to the total sum held across these accounts.
Additionally, the limit for temporarily high balances will see an increase from £1 million to £1.4 million. This particular cap is designed for significant events such as property transactions and insurance policy payouts.
The FSCS safeguards temporary high balances for up to six months from the date the funds are credited into an account. Notably, the FSCS is funded through a levy on financial firms authorized by the PRA or the Financial Conduct Authority (FCA).
Sam Woods, the Bank of England’s deputy governor for prudential regulation and PRA chief executive, emphasized that this adjustment aims to uphold public trust in the security of their finances. He highlighted that depositors will now be safeguarded up to £120,000 in case of a bank, building society, or credit union failure, which, in turn, reinforces the stability of the financial system.
Martyn Beauchamp, FSCS chief executive, expressed satisfaction with the increased deposit protection limit, ensuring consumers’ confidence in the safety of their funds across the board.
Rocio Concha, director of policy and advocacy at Which?, lauded the decision to raise the deposit protection limit, citing its positive impact on consumer trust in the financial services sector.
Eric Leenders, managing director of personal finance at UK Finance, commended the move to adjust the limit in line with inflation, emphasizing the importance of providing customers with comprehensive information on FSCS deposit protection.
