Prudential Regulatory Authority Proposes Boosting FSCS Protection to £110,000: What It Means for Your Savings
The Financial Services Compensation Scheme (FSCS) is set to undergo a significant change as the Prudential Regulation Authority (PRA) proposes an increase in the deposit protection limit from £85,000 to £110,000. This adjustment, the first since 2017, aims to enhance consumer confidence and ensure the safety of funds held in UK-authorized financial institutions, including banks, building societies, and credit unions.
Details of the Proposed Increase
The PRA’s revised limit is slated to take effect for institutions that fail starting from December 1, 2025. In a statement, Sam Woods, the Deputy Governor for Prudential Regulation and CEO of the PRA, highlighted the importance of this proposal in fostering public trust in the financial sector:
- “Confidence in our financial system is essential for economic growth.”
- The increase aims to support confidence in banks and building societies.
- Protected funds will now be up to £110,000 per person, ensuring safety even in the event of a firm’s failure.
Support from Financial Leaders
Martyn Beauchamp, CEO of the FSCS, emphasized the pivotal role of the FSCS in maintaining consumer trust:
- “Depositor protection is what FSCS is best known for.”
- Consumers consider FSCS protection vital for their trust in financial services.
- This trust is crucial for stability and growth in the sector.
Additionally, the PRA’s proposal includes extending protection for certain temporary high balance claims—like those arising from life events or insurance payouts—from £1 million to £1.4 million, starting on the same date.
Industry Reactions
Support for the increase has come from various industry leaders. Rocio Concha, Director of Policy and Advocacy at Which?, remarked:
- “Raising the deposit protection limit is a sensible decision to support consumer confidence.”
- This adjustment aligns with the government’s growth strategy, reinforcing that strong consumer protections and economic growth are interconnected.
Eric Leenders, Managing Director for Personal Finance at UK Finance, echoed similar sentiments:
- The FSCS provides crucial protection for depositors.
- The existing limit of £85,000 was established in 2017, making a review timely and necessary.
Consultation on Deposit Protection
This proposal is part of a broader consultation regarding deposit protection by the FSCS. It also considers the introduction of new regulations associated with the Banking Resolution (Recapitalisation) Bill, which aims to enhance the resilience of the financial sector.
For more insights on financial services and consumer protection, visit the FSCS website or explore our financial news section.
