UK bank customers will now enjoy enhanced protection for their money in case of a financial provider failure, with new regulations coming into 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 faces insolvency. This new limit supersedes the previous cap of £85,000 that has been in place since 2017.
Administered through the Financial Services Compensation Scheme (FSCS), the increased protection level was officially announced by the Prudential Regulation Authority (PRA). The compensation limit is applicable per individual, per authorized firm, and is typically processed automatically within seven days of the institution’s collapse.
For individuals holding funds across multiple accounts within the same banking group sharing a license, the compensation limit applies to the aggregate balance. Additionally, the limit for temporarily high balances will rise from £1 million to £1.4 million, covering significant transactions like property transactions and insurance payouts.
Temporary high balances are safeguarded by the FSCS for a duration of six months from the credit date into the account. The FSCS is sustained through a levy on financial firms regulated 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, expressed confidence that the adjustment will uphold public trust in fund security, assuring depositors of protection up to £120,000 in case of bank or credit union failures.
Martyn Beauchamp, FSCS Chief Executive, welcomed the increased deposit protection limit, emphasizing consumer confidence from the smallest to the maximum deposit amounts. Recognizing the critical role of trust in financial stability and growth, Beauchamp highlighted how the heightened protection will reinforce faith in the UK financial system.
Various industry voices echoed support for the raised limit, with Rocio Concha from Which? emphasizing its importance in bolstering consumer faith in financial services. Eric Leenders, managing director of personal finance at UK Finance, emphasized the necessity of updating the limit to align with inflation since its last adjustment in 2017. Leenders committed to assisting members in implementing these changes and ensuring customers are well-informed about FSCS deposit protection.