Starting December 1, UK bank customers will benefit from increased protection for their funds in case of a financial provider failure. The new regulations raise the compensation limit to £120,000 per person for UK-authorised banks, building societies, or credit unions, up from the previous cap of £85,000 set in 2017.

Under the Financial Services Compensation Scheme (FSCS), the higher compensation level was recently confirmed by the Prudential Regulation Authority (PRA). This protection applies per individual, per authorised firm, and is typically automatically processed within seven days of the firm’s insolvency.

If a person holds accounts with multiple banks under the same banking group sharing a license, the compensation limit encompasses the total amount across all accounts. Additionally, the limit for temporarily high balances will increase from £1 million to £1.4 million, covering significant events like property transactions and insurance payouts.

The FSCS safeguards high balances for six months after the money is credited to an account and 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, emphasized that this change aims to bolster public confidence in the security of their funds. Martyn Beauchamp, chief executive of the FSCS, welcomed the higher protection level, ensuring consumers feel secure with their money.

Rocio Concha from Which? praised the decision to increase the deposit protection limit, citing its importance in maintaining consumer confidence in the financial industry. Eric Leenders, managing director of personal finance at UK Finance, supported the update, stating that it aligns with inflation adjustments and the industry’s commitment to providing customers with necessary information on FSCS deposit protection.