The increase applies from October 1, 2007.
The previous compensation limit was a maximum of £31,700 – 100 per cent of the first £2,000 and 90 per cent of the next £33,000 of depositors’ eligible claims.
FSA managing director of retail markets Clive Briault says: “At a time of market uncertainty it is important for consumers to know their deposits are properly protected. The action we have taken is designed to help reassure depositors with accounts up to £35,000 that they are 100 per cent covered.
“The Government has indicated that it will propose further changes relating to financial services compensation arrangements in the UK designed to give consumers confidence that their savings and deposits are safe and secure.”