UK bank customers will benefit from increased financial protection in case of a provider’s failure under new regulations effective from December 1. The amount safeguarded will rise to £120,000 per person if a UK-authorised bank, building society, or credit union becomes insolvent, an increase from the previous £85,000 limit set in 2017.

This heightened protection falls under the Financial Services Compensation Scheme (FSCS) and was officially approved today by the Prudential Regulation Authority (PRA). The compensation ceiling is applicable per individual, per authorised firm, and is typically reimbursed automatically within seven days of the firm’s collapse.

For customers with funds spread across multiple accounts within the same banking group sharing a license, the compensation limit applies to the combined balance of these accounts. Additionally, the limit for temporarily high balances will also be elevated from £1 million to £1.4 million, aiding in significant transactions like property transactions and insurance payouts.

The FSCS safeguards temporary high balances for six months from the credit date into an account and is financed through a levy on PRA or Financial Conduct Authority (FCA) authorized financial institutions. Sam Woods, the Bank of England’s deputy governor for prudential regulation and PRA chief executive, emphasized that this adjustment aims to bolster public confidence in the security of their deposits, ensuring protection up to £120,000 in case of a financial institution’s failure.

Martyn Beauchamp, FSCS chief executive, welcomed the increased deposit protection limit as it assures consumers that their money, from the first penny to £120,000, is secure. This enhancement is crucial for fostering trust in financial services and bolstering confidence in the UK’s financial sector.

Various industry professionals, including Rocio Concha from Which?, Eric Leenders from UK Finance, and others, echoed support for the raised deposit protection limit, emphasizing its importance in reinforcing consumer confidence and aligning with economic growth objectives. Efforts are underway to assist financial institutions in implementing these changes and ensuring customers are well-informed about FSCS deposit protection.