There has been a proposed change to banking regulations that will result in a significant increase in the amount of money protected for savers when a bank or building society faces financial difficulties. The Prudential Regulation Authority (PRA), which oversees UK banks, has stated that the planned increase will consider inflation since the limit was last established in 2017. Currently, the deposit protection scheme allows customers to claim back up to £85,000 of their savings if a financial institution fails, but this could potentially rise to £110,000 under the new proposal.
Independent financial adviser Rob Mansfield from Rootes Wealth expressed his approval of the uprating of the limit to align with inflation, deeming it as “great news for savers and for confidence in our banking system.” The protection currently stands at £85,000 per person, per institution, with joint accounts offering protection of up to £170,000. Savers who have more than this amount to deposit are advised to distribute their funds across different banks or building societies to ensure coverage by the Financial Services Compensation Scheme (FSCS), which has provided over £20bn to depositors in the past 25 years, primarily following the 2008 financial crisis.
Martyn Beauchamp, CEO of the FSCS, emphasized the importance of regularly reviewing the limit to ensure its continued appropriateness. The proposal is part of a broader consultation on deposit protection that could potentially see an increase in the limit on “temporary high balance claims” from £1m to £1.4m, aimed at customers with substantial amounts in their accounts due to house moving or insurance payouts. PRA CEO Sam Woods highlighted the significance of customer confidence in the financial system as crucial for economic growth, with the government urging regulatory bodies to adapt their strategies to promote economic development. Rocio Concha, director of policy and advocacy at Which?, described the proposed change as “a sensible decision,” emphasizing the interconnectedness of robust consumer protections and economic growth
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