UK bank customers will enjoy increased protection for their money in case a financial provider faces insolvency as new regulations take effect. Starting 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 collapses, a rise from the previous £85,000 limit established in 2017.
This enhanced protection falls under the Financial Services Compensation Scheme (FSCS), with the elevated threshold being officially endorsed by the Prudential Regulation Authority (PRA). The compensation cap is applied per person, per authorised firm, and typically disbursed automatically within seven days of the entity’s failure.
In the scenario where an individual holds funds across multiple accounts within the same banking group sharing a banking license, the compensation limit applies to the total sum across these accounts.
Moreover, the limit pertaining to temporary high balances will also see an increase from £1 million to £1.4 million, serving purposes like significant transactions such as property transactions or insurance payouts. The FSCS safeguards temporary high balances for six months from the credit date into an account and is financially sustained through a levy on PRA or Financial Conduct Authority (FCA) authorized financial firms.
Sam Woods, the Bank of England’s deputy governor for prudential regulation and PRA’s chief executive, emphasized that this adjustment will bolster public trust in the security of their finances by ensuring depositors are shielded up to £120,000 in case of an institution’s collapse, thus reinforcing the financial system’s stability.
Martyn Beauchamp, FSCS’s chief executive, applauded the increased deposit protection limit, stating that it assures consumers that their money is secure, from the first penny to £120,000, instilling confidence in the UK’s financial framework.
Rocio Concha, Which? director of policy and advocacy, praised the decision to boost the deposit protection limit as a strategic move to uphold consumer trust in the financial services sector and emphasized the synergy between robust consumer protections and economic growth initiatives.
Eric Leenders, UK Finance’s managing director of personal finance, highlighted the importance of the FSCS in safeguarding depositors’ funds and noted the necessity to adjust the limit to keep pace with inflation since its last revision in 2017. Efforts are underway to assist members in implementing these changes and ensure customers are well-informed about FSCS deposit protection.