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'Temporary' bank cash to be protected, Bank of England says

couple getting married Image copyright Thinkstock
Image caption Couples getting married - or divorced - could benefit from the new compensation rules

People who have large amounts of money in their bank accounts "temporarily" will be soon protected in the event of their bank going bust.

The Bank of England has announced that the Financial Services Compensation Scheme (FSCS) is to be extended.

Until now, only the first £85,000 in an account has been protected by the guarantee.

But from 3 July, anyone who has up to £1m in their account for up to six months could also get compensation.

This could include people who have a lot of money in the bank because they have just sold a house - or who have received pay-outs as a result of "life events".

The following groups of people could also benefit:

  • Divorcees
  • Newly-weds
  • People who have received an inheritance
  • Workers who have been made redundant
  • Anyone receiving benefits from an insurance pay-out
  • People receiving compensation for criminal injuries or wrongful conviction

Anyone claiming compensation under the new rules will have to prove to the FSCS that they had money in the bank temporarily.

The rule change follows a consultation by the Prudential Regulation Authority (PRA), which began in October 2014.

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