Will the new FSCS deposit limit make saving more secure?

It may not feel like there is much financial news worth celebrating following the challenging Autumn Budget that has left business owners and individuals fearful of the future.

However, the Prudential Regulation Authority (PRA) have announced that under the Financial Services Compensation Scheme (FSCS), UK bank customers will benefit from a significant uplift in the deposit protection limit.

This will see the limit increase from its previous limit of £85,000 to a more generous £120,000.

For those who want to have larger savings but lack the confidence in the banking system to do so, the news may give them the encouragement they need to commit.

As such, it’s important to understand why the limit has changed and reflect on how more changes may come in the future.

Why has the FSCS limit changed?

Inflation has been steadily increasing and this has caused the real-world value of money to change notably.

While this has resulted in many experiencing fiscal drag and being pushed over thresholds, the PRA have anticipated this and adjusted the protection limit accordingly.

This means that the new FSCS limit is better designed to reflect the current value of money and ensure that the safety net is more appropriately applied.

The move is a positive sign that the PRA are focused on keeping pace with the changing economic realities of the world and may continue to adjust the limit in accordance with inflation.

What does the FSCS change mean for you?

Although not common, it is not impossible for banks and financial institutions to collapse.

The FSCS deposit limit is designed to protect any deposit that falls below the threshold.

This means that, with the new limit, depositors can rely on compensation for deposits up to £120,000 in the event of any collapse in financial institutions.

While some depositors may have been hesitant to allow their bank accounts to grow without a safety net, there is now scope to have more savings comfortably within the scope of protection.

The rise in the FSCS limit also includes an increase in the protection available for temporary high balances, which typically apply in life event scenarios such as purchasing a property or receiving insurance payouts.

The increase from £1 million to £1.4 million for the temporary high balance protection limit also serves to provide additional reassurance for individuals who are embarking on significant financial transitions.

All of these adjustments are part of a wider endeavour to modernise the UK financial sector to ensure it keeps pace with the range of economic challenges present in the world.

Given that this is quite a turbulent time for the economy, it is natural to want additional support in understanding and making the most of your finances.

This is where our expert team can provide assistance as we work to answer your questions and help you achieve your financial goals over the coming months and years.

To find out how best to protect your financial future, speak to our team today!