UK bank customers will see increased protection for their money in case of a financial provider’s failure due to new regulations taking effect. Starting from December 1, individuals will have up to £120,000 of their funds refunded 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 protection level falls under the Financial Services Compensation Scheme (FSCS) and was officially raised by the Prudential Regulation Authority (PRA). The compensation cap is applicable per person, per authorised firm, and is typically reimbursed automatically within seven days of the firm’s collapse.
In instances where an individual holds funds in multiple accounts within the same banking group that share a banking license, the compensation limit applies to the total sum across these accounts. Additionally, the limit for temporarily high balances will also increase from £1 million to £1.4 million, covering significant events like property transactions and insurance payouts.
Temporary high balances are safeguarded by the FSCS for six months from the date the money is deposited. 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, noted that this change aims to uphold public trust in the security of their funds, ensuring depositors are protected up to £120,000 in case of a financial institution’s failure. Martyn Beauchamp, FSCS chief executive, emphasized that this increase strengthens consumer confidence, assuring individuals that their funds are secure up to the new limit.
Various industry stakeholders, including Rocio Concha from Which? and Eric Leenders from UK Finance, lauded the decision to raise the deposit protection limit, highlighting its importance in bolstering consumer trust in the financial services sector and ensuring financial stability. They emphasized the need for strong consumer protections to align with efforts to enhance economic growth, underscoring the importance of keeping customers informed about FSCS deposit protection updates.