A proposed change to banking rules will increase significantly the amount of savers’ money that is protected when a bank or building society goes under.
The planned increase takes into account inflation since the limit was last set in 2017, the body which supervises UK banks, the Prudential Regulation Authority (PRA) said.
If a financial institution fails, the deposit protection scheme means customers can currently claim back the first £85,000 of their savings. That would rise to £110,000 under the new proposal.
The plan is subject to a consultation, but if adopted the higher limit would apply from 1 December 2025.
Rob Mansfield, independent financial adviser at Rootes Wealth, said uprating the limit in line with inflation was very welcome and “great news for savers and for confidence in our banking system”.
Currently, savers are protected to the tune of £85,000 per person, per institution. For a joint account that means protection rises to £170,000.
Savers with more than that to deposit are advised to spread their money between different banks or building societies to ensure it is covered by the compensation scheme, which is operated by the Financial Services Compensation Scheme (FSCS).
Over the 25 years since its foundation, the FSCS has paid over £20bn to depositors, primarily as a result of the 2008 financial crisis.
Martyn Beauchamp, chief executive of the FSCS, said it was important the limit was reviewed regularly to ensure it stayed “appropriate and relevant”.
The proposal is part of a wide-ranging consultation on deposit protection which could also see the limit on “temporary high balance claims” rise from £1m to £1.4m. That covers customers who have large amounts in an account because they are moving house or have received a payout from an insurance policy.
Sam Woods, chief executive of the PRA, said customer confidence in the financial system was “an essential foundation for economic growth”.
The government has called on regulatory bodies to revise their strategies to promote economic growth.
Rocio Concha, director of policy and advocacy at the consumer group Which?, described the change as “a sensible decision”.
“At a time when the government and regulators are going for growth, this decision is a reminder that strong consumer protections and economic growth go hand in hand.”
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