Compensation rises to £85,000

Compensation limits for savers who lose money when a bank or building society goes under are set to increase significantly from the end of this year. From 31 December, the Financial Services Compensation Scheme will raise the amount it will pay out to the equivalent of the first €100,000 (£85,274) that people have lost.

Individual account-holders may currently receive £50,000 to cover savings lost when a lender is declared in default. People with joint accounts will see the maximum amount of redress rising from its current level of £100,000 to €200,000.

The move follows new EU legislation which aims to harmonise the amount savers across Europe receive as compensation if a bank or building society goes under.

Under the rules, savers must receive their money within 20 days of an institution being declared in default, although the FSCS has set itself the target of paying out within seven days.