Jon Pain, managing director of retail markets at the FSA, said: “These changes will help consumers understand and have confidence in the protection that is provided by the Financial Services Compensation Scheme.
“In particular, they will remove the potentially confusing provisions under which some parts of claims can be paid out at 100% and other parts at 90%.”
The changes, which will come into effect next January, mean the compensation limit for investments, home finance advice and deposits will be £50,000 while all claims for non-compulsory insurance will be paid at 90%, with no upper limit.
For advising on or arranging house purchase finance there will be protection of 100% up to £50,000. At the moment 100% of the first £30,000 and 90% of the next £20,000 are covered.
For non-compulsory insurance provision, both general and life cover customers will get protection for 90% of their claims, with no upper limit. Under the present system 100% of the first £2,000 of claims and 90% of the remainder are covered.
There will be no change to compensation arrangements when it comes to compulsory insurances such as motor third party and employers’ liability cover, with the compensation available for these sorts of claims remaining at 100%, with no upper limit.