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Savers who have accounts with two merging building societies will have up to £100,000 of their money protected if anything goes wrong, following a rule change announced by the City watchdog today.
The move follows concern that savers could find their holdings exceed the current £50,000 cover offered by the Financial Services Compensation Scheme (FSCS) if a savings provider goes under.
The credit crunch has caused a number of building societies to merge this year. Recently, Nationwide announced it was to step in and rescue both the Derbyshire and Cheshire, and as a result some savers have seen several accounts end up with the same society.
When building societies join forces they are legally required to operate as a single organisation with a single authorisation from the Financial Services Authority (FSA).
Previously this meant the depositor protection scheme would protect only the first £50,000 held by each saver in the combined society, but the FSA said societies which still trade under a separate name could retain a separate compensation limit.
The change means a saver with accounts with the Nationwide, Derbyshire and Cheshire building societies effectively has £150,000 protected under the FSCS, as long as they have no more than £50,000 held with each society.
The FSA is currently consulting on how to improve depositor protection and the new rules will operate on a temporary basis until September next year.
The problem has not arisen in the banking sector as banks are not legally obliged to operate under a single authorisation. This means savers with Abbey and Alliance & Leicester, which are both owned by Santander, have up to £50,000 protected in each bank.
Adrian Coles, director-general of the Building Societies Association, said: "It would not be appropriate that moves designed to reassure and protect members, such as the mergers currently underway, ultimately result in a reduction in the levels of FSCS protection for members with savings in both societies.
"This change allows those members to enjoy the same levels of protection as they would have if the merger had not taken place."
Graham Beale, chief executive of Nationwide, said a number of customers with savings in the Cheshire and Derbyshire had raised concerns about the limits of the FSCS.
"We have been working hard with the regulator to come up with a solution that works for members of merged societies and are delighted that we can now ease customers' concerns," he said.
Nationwide's merger with Derbyshire building society is due to take effect on Monday, while the merger with Cheshire, which is still subject to FSA approval, is due to take effect on December 15.
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