Previously the limit was set at £85,000 but the UK government has now announced a record increase. This amendment provision forms part of the Financial Services Compensation Scheme (FSCS). This provision is intended to increase consumer confidence that their funds are safe. The new limit is set to take effect in December and will apply to customers’ money held in banks, building societies, or credit unions in the event of a financial institution’s failure.
The Financial Services Compensation Scheme is important for consumer protection. It empowers the public to get their money back when a big financial institution fails. The scheme is widely understood to protect deposits up to £85,000. The recent decision demonstrates our desire to respond to changing economic circumstances, namely a rising inflationary tide. The ceiling for temporary high balances is due to increase from £1 million to £1.4 million for six months. This amendment gives our customers greater assurance that their larger deposits are safe and secure.
As Sam Woods, the Bank of England deputy governor for prudential regulation, described recently, it was a big deal. He is the chief executive of the Prudential Regulation Authority (PRA). He said that it’s critical to keeping the public’s confidence that their money is safe.
Eric Leenders, managing director of personal finance at UK Finance, said this long-awaited refresh was needed. He acknowledged changing the limit to bring it in line with inflation as “correct” and necessary to ensure consumers’ savings continue to be protected.
Martyn Beauchamp, chief executive of the FSCS, said he welcomed the new limits. He stated, “This rise ensures that consumers can feel confident their money is safe, from the very first penny up to £120,000.”
Consumer advocacy group Which ? reacted to the changes as well. Policy Director Rocio Concha expanded on the impact of these improvements. She remarked, “It is 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.”
The boost in limits on deposit protections is a welcome preemptive strike against recessionary and chaotic economic times. It seeks to instill confidence in consumers that their financial security is sound. With the new regulations continuing to come into effect this December, consumers should be able to expect better protection for their deposits.