Major Boost for UK Savers as Deposit Protection Limit Increases
In a significant move to bolster consumer confidence, the UK's financial safety net for bank deposits is set to increase by over 40% this December. The Prudential Regulation Authority (PRA) has confirmed that the Financial Services Compensation Scheme (FSCS) limit will rise from £85,000 to £120,000, offering greater security to millions of savers across the country.
Key Details and Implementation Timeline
The enhanced protection will officially come into effect on 1 December 2025. This change means that if a UK-authorised bank, building society, or credit union fails, customers will be protected for up to £120,000 of their money. The FSCS has stated that customers can typically expect to receive their compensation within seven days of their provider going out of business.
This update represents a substantial increase from the current limit, which was established back in 2017. Notably, the final figure of £120,000 exceeds the PRA's initial proposal of £110,000, a revision made following consultation feedback and to better reflect recent inflation data.
Importantly, customers do not need to take any action to benefit from this increased protection, as the new limit will apply automatically to all eligible deposits.
Important Considerations for Savers
While the increase is straightforward, savers should be aware of how the protection is applied. The £120,000 limit applies per person, per authorised firm. This becomes crucial for customers who use multiple brands operating under the same banking licence.
If you hold accounts with several banks that are part of the same banking group and share a single licence, the compensation limit applies to the total combined amount held across all these accounts, not to each account individually. It is therefore advisable to check whether your provider shares its banking licence with other brands where you hold money.
Industry and Regulatory Reaction
Sam Woods, Deputy Governor for Prudential Regulation at the Bank of England and CEO of the PRA, emphasised the importance of this change, stating: "This change will help maintain the public's confidence in the safety of their money. It means that depositors will be protected up to £120,000 should their bank, building society or credit union fail. Public confidence supports the strength of our financial system."
Martyn Beauchamp, Chief Executive of the FSCS, welcomed the announcement, saying: "This rise ensures that consumers can feel confident their money is safe, from the very first penny up to £120,000. At FSCS, we know that trust in financial services is vital for stability and growth."
Consumer group Which? also supported the move. Rocio Concha, Director of Policy and Advocacy, commented: "Increasing the deposit protection limit is a sensible decision to support consumer confidence in the financial services industry."
Additional Protection for Large Balances
Alongside the main deposit protection increase, the limit for certain temporary high balances will also rise from £1 million to £1.4 million on 1 December. This protection covers specific life events such as funds from house purchases or sales, and insurance policy payouts, and lasts for six months from when the money is deposited.
The FSCS, which is funded by a levy on financial firms authorised by the PRA or the Financial Conduct Authority (FCA), will work with industry partners to raise awareness of the new limits. Firms have until May 2026 to update their materials with the new "FSCS protected" badge.
