Savings clubs allow shoppers to pay for goods and services in instalments throughout the year, instead of in one go. These savings are currently not protected as they would be in a bank account by the Financial Services Compensation Scheme. The new laws mean savings clubs must safeguard shoppers' savings by using insurance or trusts, so even if the company goes bust, shoppers' money will still be protected. 

This will prevent scandals like Farepak, a Christmas savings club that collapsed in 2006 leaving thousands of customers unable to pay for Christmas. 

Consumer Minister Paul Scully said: 

"We're seeing rising costs caused by global pressures around the world, which is why we're taking action worth over £22 billion this year to help UK families with the cost of energy bills and ensure people keep more of their money.  

"Now more than ever, families' hard-earned savings need to be protected. New laws will crack down on dodgy dealers who have no plans in place to protect shoppers' savings if their business goes to the wall. We'll make sure scandals like Farepak never happen again, where thousands of families, many on low incomes, lost all they had saved for Christmas." 

Many UK supermarkets and other businesses have a Christmas savings club, allowing customers to top up an account throughout the year and receive products and services in time for Christmas. Analysis from the Bank of England has shown the average family spending around £740 extra in December. 

The law will apply to Christmas savings clubs and other prepayment schemes that are forms of savings club.  

The Government will also explore if there are other sectors posing risks to shoppers making prepayments, and whether similar protections are needed. Shoppers frequently make substantial prepayments in advance of events or work taking place, leaving them exposed to risks if the organisation they are doing business with becomes insolvent.

Examples of things frequently pre-paid for include weddings and home improvements.   

Today's announcement forms part of a package of measures to help consumers to be unveiled this week.