If a bank or building society collapses, savers are guaranteed to get some of their money back. This limit of compensation was increased from £35,000 to £50,000, which came into effect on Tuesday 7 October 2008, increasing the previous limit by £15,000. This change was rolled out in an attempt to restore trust in concerned savers and to return stability to the financial sector.

The FSA is now looking into whether the limit should be raised even higher.

In 2008, Ireland introduced an unlimited guarantee to completely protecting its savers, giving them competitive advantage over most UK banks. This resulted in several large businesses and individuals based in England to move their money across to Irish banks.

The fear now is that if this was to continue it would cause more problems for the UK, so the Prime Minister, Gordon Brown, has probably chosen to act now to try to retain money from its investors.

The limit is set up on a per customer basis, so joint savings accounts will be provided with guaranteed protection for up to £100,000, that's £30,000 more than under the previous limit.

Potential payments will be made through the FSCS and the FSA has said that it intends to look into ways of improving the current system in order to allow compensation to be paid faster .

There are limitations to this new increased limit, as you can only claim up to £50,000 held within any one financial institution, so take HBOS as an example, if you had more than £50,000 spread between Halifax and Bank of Scotland, you would only be eligible to claim back up to £50,000 between these banks if HBOS were to collapse. For this reason it is recommended that you either spread your cash between separate institutions, i.e. Santander and HBOS, or store your savings with an institution that offers unlimited compensation, such as nationalised bank Northern Rock.

It is worth considering spreading your savings between institutions holding no more than £50,000 in each, while keeping your returns competetive. All accounts follow the same principles, with no exception to ISAs, so if you're looking to protect your savings in full the scour the market to find the best isa rates.