Image copyright Thinkstock

Millions of savers are being reminded that they may need to move some of their cash, to guarantee it will be fully protected in the event of their bank going bust.

New rules come in on 1 January, which will reduce compensation to £75,000 per person, per institution.

Previously the Financial Services Compensation Scheme (FSCS) protected savings of up to £85,000.

Joint accounts will see protection cut from £170,000 to £150,000.

The maximum compensation across the European Union is set at €100,000, and the British level was reduced as a result of the pound gaining strength against the euro.

The precise rate was set on 3 July 2015.

At the time, one senior Tory MP described the change as "defective".

'Complicated'

Although 95% of savers will still be protected, as many as 2.5 million people may not be, according to the FSCS. It is advising savers who have more than £75,000 in one institution, to move their money if necessary.

The situation is further complicated by the fact that some registered banks and building societies operate under more than one brand.

So it you had £75,000 savings with HSBC, for example, any additional savings in First Direct would not be protected, as both banks have a joint licence.

Savers using Bank of Scotland and Halifax are in the same position.

But Royal Bank of Scotland (RBS) and NatWest - although they are sister banks - are both registered separately. So savers could safely have up to £75,000 in accounts with both banks.

"While this should be quite simple to navigate, it's made complicated by the fact that FSCS cover is shared between banks that operate under the same licence," said Hannah Maundrell, editor in chief of money.co.uk.

The Financial Conduct Authority (FCA) publishes a full list of registered banks, and which brands come under the same umbrella.

Image copyright Getty Images Image caption Some European banks operating in the UK will offer different levels of protection

European banks

Under the new rules, savers who have up to £1m in their accounts temporarily - as a result of selling a house, or being made redundant, for example - are also protected.

To receive compensation, they cannot have had that cash in their accounts for more than six months.

A further warning comes in relation to some foreign banks which trade in the UK, but are registered elsewhere in Europe, such as Germany's Fidor Bank, or Sweden's Handelsbanken.

Handelsbanken confirmed that the level of compensation would depend on the exchange rate at the time.

So depending on how much €100,000 is worth in pounds, savers may get more or less than £75,000 protection. At the time of writing, that amount is worth less than £74,000.

"With an increasing number of European banks now offering competitive rates, customers need to be aware that not all savings accounts offered in the UK are covered by the UK compensation scheme," said Rachel Thrussell, savings insight manager at Moneyfacts.co.uk.