Savers were given a boost in security today, as it was announced that the deposit protection limit is to be raised to £50,000.
The compensation limit for savers is to be officially raised from £35,000 to £50,000 from next Tuesday.
Announcing the move, the Financial Services Authority (FSA) said that the authorities will do "whatever is necessary" to protect savers. The government has raised the amount that savers can claim back if their bank goes bust in the wake of near-unprecedented market instability.
Following the nationalisation of Bradford & Bingley and the takeover of HBOS by Lloyds TSB, it had been reported that savers were withdrawing their money from high street banks and into "safe haven" accounts such as those offered by National Savings & Investments. Therefore, putting the limit up to £50,000 should boost confidence in the banking system and help to avert the possibility of a run on a bank such as that seen with Northern Rock last year.
However, the UK has not gone as far as Ireland, which is facing a similar loss of confidence in banks and has responded by enforcing a 100 percent guarantee on all savings.
Hector Sants, FSA's chief executive officer, said: "There has been extensive debate about the compensation levels. In the interests of providing clarity over the minimum level for the long term we have now decided to implement the move to a £50,000 limit from Tuesday.
"This change ties in with the introduction of the government's Banking Bill in parliament which is due next week, and is also appropriate given the consolidation that has taken place in the banking sector.
Joint accounts are also guaranteed up to £100,000 under the new rules.
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