The amount of cash that is protected if a bank or building society goes bust is set to rise for the first time in eight years, The Mail on Sunday understands.
In a major boost for millions of savers, the Bank of England is expected to confirm that the deposit guarantee limit will increase from £85,000 to £110,000.
It is due to come into effect on December 1 – just five days after the Budget, when Rachel Reeves is expected to launch a tax raid on popular cash Isa accounts.
Fears they will be hammered by the Chancellor have seen savers salt away huge sums of cash. Almost £100billion has poured into easy-access and fixed-rate accounts, as well as Isas, since Labour came to power last year.
In September alone an extra £2.4billion went into cash Isas.
In a major boost for millions of savers, the Bank of England is expected to confirm that the deposit guarantee limit will increase from £85,000 to £110,000
Savers can put up to £20,000 a year tax-free into Isas. But Ms Reeves wants to funnel more of that money into stocks by slashing the tax-free cash Isa allowance.
Her plans have met fierce resistance from building societies, who warn that cutting cash Isas could hinder mortgage lending.
The new rules will ‘give consumers confidence that their money is safe if their UK-authorised bank, building society or credit union fails’, the Bank of England said when it launched a review earlier this year.
Currently, deposits are protected to the tune of £85,000 per person per bank, rising to £170,000 for a joint account.
Under the new rules, an individual’s limit will rise to £110,000, while joint account holders will have up to £222,000 guaranteed.
The amount of cover for so-called ‘temporary high balances’ – where bank accounts are suddenly swelled by life events such as moving house or receiving an inheritance – will also rise, from £1million to £1.4million.
The bigger safety net may encourage households to defy the Chancellor and park more of their money in cash, where they can still find rates that beat inflation, instead of stocks and shares.
Fears they will be hammered by the Chancellor have seen savers salt away huge sums of cash
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