UK bank customers will benefit from increased protection for their money in the event of a financial provider’s failure, thanks to new regulations taking effect soon.
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 collapses, a significant boost from the previous £85,000 limit set in 2017.
This enhanced protection falls under the Financial Services Compensation Scheme (FSCS) and has been officially raised by the Prudential Regulation Authority (PRA).
The compensation limit applies on a per-person, per-authorised firm basis and is typically processed automatically within seven days following the firm’s insolvency.
In cases where an individual holds accounts with multiple banks belonging to the same banking group sharing a license, the compensation limit applies collectively to the total balance across those accounts.
Moreover, the limit for temporarily high balances will also see an increase from £1 million to £1.4 million, catering to significant events such as property transactions and insurance payouts.
Temporary high balances are protected by the FSCS for six months from the date the funds are credited to the account. Funding for the FSCS comes from levies on financial firms authorized by the PRA or the Financial Conduct Authority (FCA).
Commenting on the development, Sam Woods, the Bank of England’s deputy governor for prudential regulation and PRA chief executive, emphasized that the adjustment aims to bolster public confidence in the security of their deposits.
Martyn Beauchamp, FSCS’s chief executive, echoed this sentiment, highlighting the importance of ensuring consumer trust through the enhanced protection now in place.
Various industry figures, including Rocio Concha from Which?, Eric Leenders from UK Finance, and others, have welcomed the decision to raise the deposit protection limit, noting its positive impact on consumer confidence and economic stability.
Overall, the move to update the protection limit is seen as a crucial step in aligning with current financial landscapes and inflation rates, ensuring that customers are well-informed and safeguarded under the FSCS scheme.