The Financial Services Authority has confirmed that the compensation limit for depositors will increase from £50,000 to £85,000. This increase in the limit came into effect from 31st December 2010.

This is the Sterling equivalent of the €100,000 compensation limit which comes into force within the European Economic Area (EEA) on the same date.

The new increased limit applies per individual, per authorised firm.

In addition, other areas also addressed included:

  • Faster payouts – most payouts should be made within 7 days with any outstanding ones made within a maximum of 20 days.
  • Gross Payout – this ring fences savings of those individuals who also have loans outstanding with the same institution – under current rules any deposit could be offset against liability outstanding before paying out any funds remaining to the individual account holder.

Further information on the recent changes can be found on the FSA website.

UK depositor protection is administered by the FSCS (Financial Services Compensation Scheme).

Although the new increased limit is welcomed it would be a shrewd move for those with large sums on deposit to ensure they hold no more than £85,000 with any one institution.