UK bank customers will enjoy increased protection for their money in case of a financial provider failure, thanks to new regulations taking 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 faces insolvency, a significant increase from the previous £85,000 limit set in 2017.
This higher compensation ceiling falls under the Financial Services Compensation Scheme (FSCS) and has been officially ratified by the Prudential Regulation Authority (PRA). The compensation limit is per person, per authorised firm, and is typically automatically processed within seven days following the firm’s collapse.
For customers with multiple accounts across different banks under the same banking group sharing a license, the compensation limit applies to the total sum held across these accounts. Furthermore, the cap for temporarily high balances will be raised from £1 million to £1.4 million, covering substantial transactions like property purchases, insurance payouts, and other major events.
The FSCS safeguards temporary high balances for six months from the date of credit into an account. It is sustained through a levy on financial institutions authorized by the PRA or the Financial Conduct Authority (FCA). Sam Woods, the Deputy Governor for Prudential Regulation at the Bank of England and CEO of the PRA, emphasized that this change aims to bolster public confidence in the security of their finances.
Martyn Beauchamp, CEO of the FSCS, lauded the increase in the deposit protection limit, highlighting that consumers can now feel assured that their funds are safe up to £120,000. Rocio Concha from Which? praised the decision to boost the deposit protection limit, emphasizing its role in fortifying consumer trust in financial services amidst efforts to stimulate economic growth.
Eric Leenders, the Managing Director of Personal Finance at UK Finance, expressed support for the adjustment to the deposit protection limit, citing the need to address inflation since the limit was last updated in 2017. Industry stakeholders are committed to aiding members in implementing these changes and ensuring customers are well-informed about FSCS deposit protection.