UK bank customers will benefit from increased protection for their money in case of a financial provider failure, as new regulations take effect. Starting December 1, individuals will be eligible to receive up to £120,000 of their funds if a UK-authorised bank, building society, or credit union becomes insolvent. This enhanced coverage supersedes the previous limit of £85,000, which had been enforced since 2017.
The higher compensation threshold falls under the Financial Services Compensation Scheme (FSCS) and has been officially approved by the Prudential Regulation Authority (PRA). The £120,000 cap applies per person per authorised firm and is typically reimbursed automatically within seven days of the firm’s collapse.
In cases where an individual holds accounts with multiple banks within the same banking group sharing a license, the compensation limit applies to the total sum across all accounts.
Additionally, the limit for temporarily high balances will be raised from £1 million to £1.4 million. This adjustment caters to significant events like property transactions and insurance payouts.
Temporary high balances are safeguarded by the FSCS for a period of six months from the credit date. The FSCS is funded through a levy on financial firms authorized by the PRA or the Financial Conduct Authority (FCA).
Sam Woods, Deputy Governor for Prudential Regulation at the Bank of England and CEO of the PRA, highlighted the importance of this change in bolstering public confidence in the security of their finances. Martyn Beauchamp, CEO of the FSCS, echoed this sentiment, emphasizing that the increased protection ensures consumer trust in the financial system.
Various industry experts also voiced their support for the enhanced deposit protection limit, acknowledging its role in reinforcing consumer confidence and stability in the financial services sector. They emphasized the necessity of adjusting the limit to keep pace with inflation and pledged to assist members in implementing these changes effectively.