From 1 December, UK bank customers will be protected for up to £120,000 if their bank fails, the Prudential Regulation Authority (PRA) has announced.
The deposit protection limit, which applies to the Financial Services Compensation Scheme, will increase from its current limit of £85,000, which was set in 2017.
The increase – which applies to deposits held in banks, building societies and credit unions – reflects consultation feedback and the latest inflation data, the PRA said.
An increase in the limit applicable to certain temporary high balance claims will also come into force on 1 December. The limit – used for qualifying life events such as buying or selling a house and payouts from insurance policies – will increase from £1 million to £1.4 million.
The changes are the latest in a series of regulatory thresholds to be updated by the PRA, which it says will ensure ‘the rulebook is modernised and fit for today’s circumstances’.
Martyn Beauchamp, CEO of the FSCS, commented:
“We welcome today’s announcement from the Prudential Regulation Authority (PRA) 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.”
Rachel Springall, finance expert at moneyfactscompare.co.uk, said the increase ‘is great news for consumers’.
“It is interesting to see that the new limit is a bit higher than the PRA’s initial proposal to increase the limit to £110,000, off the back of feedback and to ‘reflect the latest inflation data.
“More good news comes from the fact that the six-month temporary high balance cover will also be increased to £1.4 million. This is incredibly important for those who, by no fault of their own, hold significant balances from major life events, such as receiving a significant inheritance or holding cash from a house sale.
“Those who have the cash stored up in a current account would be wise to shift it to a savings account, if they anticipate holding it for more than six months to earn a better return of interest. It is particularly important to split the funds with different UK-authorised banks, building societies or credit unions to keep within the FSCS deposit protection limit.”
Rocio Concha, director of policy and advocacy at Which?, said increasing the limit is a sensible decision that will support consumer confidence.
“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.”
