UK bank customers will benefit from increased protection of their money in case of a financial provider’s failure, as new regulations take effect. Starting from December 1, individuals can expect up to £120,000 of their funds to be reimbursed if a UK-authorised bank, building society, or credit union becomes insolvent, up from the previous limit of £85,000 established in 2017.
This higher compensation threshold falls under the Financial Services Compensation Scheme (FSCS) and was officially approved today by the Prudential Regulation Authority (PRA). The coverage limit applies per person, per authorized firm, and is typically automatically processed within seven days of the firm’s collapse.
In instances where an individual holds money across multiple accounts within the same banking group sharing a single banking license, the compensation limit extends to the total sum held in those accounts.
Moreover, the cap for temporarily high balances will also rise from £1 million to £1.4 million. This particular limit is designated for significant events such as property transactions and insurance payouts.
The FSCS safeguards temporary high balances for a duration of six months from the time the money is deposited into an account. Funding for the FSCS is sustained through a levy on financial institutions authorized by either the PRA or the Financial Conduct Authority (FCA).
Sam Woods, the Bank of England’s Deputy Governor for Prudential Regulation and PRA’s Chief Executive, emphasized that this adjustment aims to uphold public trust in the security of their deposits, ensuring protection of up to £120,000 in case of a financial institution’s insolvency. He stressed the importance of public confidence in underpinning the robustness of the financial system.
Martyn Beauchamp, FSCS Chief Executive, welcomed the PRA’s decision to raise the deposit protection limit, emphasizing that this increase provides consumers with assurance that their money is secure from the first penny up to £120,000. Strengthening consumer confidence and bolstering trust in the UK’s financial sector are crucial objectives.
Rocio Concha, Which? Director of Policy and Advocacy, commended the decision to elevate the deposit protection limit, highlighting its positive impact on consumer confidence in the financial services sector and underscoring the role of robust consumer protections in fostering economic growth.
Eric Leenders, Managing Director of Personal Finance at UK Finance, acknowledged the value of the FSCS in safeguarding depositors’ funds and supported the adjustment of the limit to account for inflation since its last revision in 2017. He committed to assisting members in implementing these changes and ensuring customers are well-informed about FSCS deposit protection.