UK bank customers will now enjoy increased protection for their money in case a financial institution fails, thanks to new regulations taking effect. Starting December 1, individuals can expect up to £120,000 of their funds to be reimbursed if a UK-authorized bank, building society, or credit union collapses. This updated coverage surpasses the previous limit of £85,000, which had been enforced since 2017.
The enhanced protection falls under the Financial Services Compensation Scheme (FSCS), with the higher threshold officially approved by the Prudential Regulation Authority (PRA). The compensation cap applies per person, per authorized firm, and is typically automatically processed within seven days following the firm’s insolvency.
In cases where an individual holds funds across multiple accounts within the same banking group sharing a license, the compensation limit is applicable to the total amount held collectively in these accounts. Additionally, the limit for temporarily high balances will be raised from £1 million to £1.4 million, catering to significant events like property transactions and insurance payouts.
Temporary high balances are safeguarded by the FSCS for six months from when the money is credited into an account. The FSCS is sustained by a levy imposed 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 CEO of the PRA, expressed confidence that these adjustments would reinforce public trust in the security of their funds. Martyn Beauchamp, FSCS CEO, welcomed the news, emphasizing that this increase assures consumers that their money is secure up to the £120,000 limit.
The move was endorsed by Rocio Concha, Director of Policy and Advocacy at Which?, who highlighted the significance of bolstering consumer confidence in the financial services industry. Eric Leenders, Managing Director of Personal Finance at UK Finance, also commended the decision to update the limit, considering inflation since its establishment in 2017. Implementing these changes efficiently and ensuring customers are well-informed about FSCS deposit protection will be a priority for industry members moving forward.