Up to £120,000 of your cash will be returned to you if a UK-authorised bank, building society or credit union goes out of business
UK bank customers will have more of their money protected if a financial provider fails under new rules coming into force.
As of December 1, up to £120,000 of your cash will be returned to you if a UK-authorised bank, building society or credit union goes out of business. This is up from the current cap of £85,000, which had been in place since 2017.
The limit applies under the Financial Services Compensation Scheme (FSCS) and the higher level was confirmed today by the Prudential Regulation Authority (PRA).
The compensation limit applies per person, per authorised firm, and is usually paid automatically within seven days of the firm going bust.
If someone holds money in several accounts with multiple banks that are part of the same banking group, and they share a banking licence, the compensation limit applies to the total amount held across these accounts.
The limit that applies to temporarily high balances will also be raised from £1million to £1.4million. This limit is used for big events such as buying or selling a house and payouts from insurance policies.
The FSCS protects temporary high balances for six months from when the money is credited into an account. The FSCS is funded by a levy on financial firms authorised by the PRA or the Financial Conduct Authority (FCA).
Sam Woods, deputy governor for prudential regulation at the Bank of England and chief executive of the PRA said: “This change will help maintain the public’s confidence in the safety of their money.
“It means that depositors will be protected up to £120,000 should their bank, building society or credit union fail. Public confidence supports the strength of our financial system.”
Martyn Beauchamp, chief executive of the FSCS, said: “We welcome today’s announcement from the Prudential Regulation Authority confirming that the FSCS deposit protection limit will increase.
“This rise ensures that consumers can feel confident their money is safe, from the very first penny up to £120,000.
“At FSCS, we know that trust in financial services is vital for stability and growth. This enhanced protection will reassure consumers and support confidence in the UK’s financial system.”
Rocio Concha, Which? director of policy and advocacy, said: “Increasing the deposit protection limit is a sensible decision to support consumer confidence in the financial services industry.
“It is also a timely reminder that, at a time when the Government and regulators are trying to boost economic growth, strong consumer protections needn’t hamper those aims.”
Eric Leenders, managing director of personal finance at banking and finance industry body UK Finance, said: “The FSCS provides depositors with valuable protection as they know their money is safe.
“As the current limit of £85,000 was set back in 2017, it is right to update it to take account of inflation.
“We will now work to support our members to implement these changes and ensure customers have all the information they need about FSCS deposit protection.”
