The Bank of England has announced an increase in the deposit protection limit for customers, raising it to £120,000. This adjusted figure surpasses the previous proposal of £110,000 and takes into account current inflation data and input from consultations.
Details of the New Protection Scheme
The updated protection applies to each individual, per authorised firm. It’s important to note that some banking groups operate multiple brands under a single licence. Therefore, the limit applies to the total amount held across these brands.
Customers will automatically benefit from this new limit without needing to take any action.
Statements from Officials
Sam Woods, deputy governor for prudential regulation at the Bank of England, emphasized the importance of this change for public confidence. He stated, “This change will help maintain the public’s confidence in the safety of their money.
Woods added, “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.”
Industry Reactions
- Consumer Group Which? described the increase as a “sensible decision” that reinforces consumer trust in financial services.
- Rocio Concha, Director of Policy and Advocacy for Which?, noted the timing of this change amidst efforts to boost economic growth.
- UK Finance also endorsed the update. Eric Leenders, Managing Director of Personal Finance, stated it was necessary to reflect inflation and facilitate the transition.
Changes to Temporary High Balances
In addition to the increase in the deposit protection limit, the cap for temporary high balances will rise from £1 million to £1.4 million. This change aims to cover exceptional life events such as proceeds from house sales or insurance payouts for a duration of six months.
Funding and Oversight
The Financial Services Compensation Scheme (FSCS) that facilitates this protection is funded through levies imposed on financial firms authorized by either the Prudential Regulation Authority (PRA) or the Financial Conduct Authority (FCA).
