UK savers will receive greater protection if a bank or building society goes bust from the start of next year.

The Financial Services Compensation Scheme has announced that the protection limit for savings accounts will increase from £50,000 to the sterling equivalent of €100,000 in January. This means if your bank goes under you will be able to claim compensation up to this limit.

The protection is “per person per bank” which means people with joint accounts will also benefit from the change, with the maximum amount of redress they can receive rising from its current account level of £100,000 to €200,000.

The increase will be introduced on January 1, 2011 and a decision will be made later this year about what exchange rate to use to fix the UK limit. If fixed today compensation would be available up to about £85,000.

The new rules, which aim to harmonise safety nets across Europe, also state that 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.

The FSCS limit was last increased in October 2008, at the height of the banking crisis, when it was raised from £35,000. The scheme is funded by a levy on the banks.