Guarantee on savings raised to £50,000

The City watchdog today raised the guarantee on personal savings from £35,000 to £50,000 as it moved to restore confidence in the banking sector.

The limit comes into force on Tuesday and the Financial Services Authority said customers with joint bank accounts will be able to claim up to £100,000 should their bank or building society collapse.

It means 98% of bank customers will be protected. However, the other 2% have savings worth nearly £500 billion, or half the deposits in Britain.

Ireland this week promised to guarantee all savings in Irish banks, which have since seen a surge in deposits from British savers looking for a haven.

FSA chief executive Hector Sants 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."