The amount of savings protected by the Financial Services Compensation Scheme (FSCS) will increase to £85,000 next year.
Currently, the first £75,000 of savings with any participating financial institution are covered.
However, this is expected rise by £10,000 from January 30 2017 following calls from the Bank of England.
What is the FSCS?
The FSCS is a compensation scheme which protects your savings in the event of the financial firm you’re with going bust.
It’s authorised by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority.
[SPOTLIGHT]The scheme covers deposits, insurance policies, insurance broking, investment business and home finance.
Why is the limit rising?
The amount of compensation payable is set at €100,000 across the European Union.
In 2015, the limit was reduced from £85,000 to £75,000 off the back of a strong pound.
However, sterling plummeted over the summer, triggered by the shock Brexit vote. As such, the Bank of England has now called for the savings limit to be reinstated at its previous level.
Note that the FSCS limit only applies per banking licence, rather than per bank. So, for example, you are currently only covered for £75,000 worth of savings across both HSBC and First Direct.
You can read more about which banks are connected here.