UK bank customers will benefit from increased protection of up to £120,000 per individual in case of a financial institution’s insolvency, starting December 1. This new cap, raised from the previous £85,000 limit established in 2017, falls under the Financial Services Compensation Scheme (FSCS) and was approved by the Prudential Regulation Authority (PRA).
The compensation coverage applies per person, per authorized firm, and is typically automatically disbursed within seven days of the firm’s collapse. If an individual holds funds across multiple accounts within the same banking group sharing a license, the compensation limit encompasses the total amount held in all accounts.
Moreover, the temporary high balances limit will increase from £1 million to £1.4 million, safeguarding significant amounts for events like property transactions and insurance payouts. The FSCS safeguards these balances for six months from the credit date, funded through levies on PRA or Financial Conduct Authority (FCA) authorized financial firms.
Sam Woods, the Bank of England’s Deputy Governor for Prudential Regulation and PRA Chief Executive, expressed that the enhanced protection will uphold public confidence in their funds’ safety. Martyn Beauchamp, FSCS Chief Executive, emphasized that the raised limit ensures consumer security from the first penny up to £120,000.
Rocio Concha from Which? applauded the decision to elevate the deposit protection limit, emphasizing its role in bolstering consumer trust in financial services. Eric Leenders, UK Finance’s Managing Director of Personal Finance, supported the adjustment, citing its alignment with inflation changes since the last limit revision in 2017.
The move to update the protection limits aims to provide customers with reassurance and necessary information on FSCS deposit protection, with industry stakeholders committed to facilitating these changes for enhanced customer security.