UK Boosts Bank Deposit Protection to £120,000 from December, Here’s What Savers Must Know

Bank Deposit Protection: The UK’s safety net for bank savers is set to grow significantly. From 1 December 2025, the Financial Services Compensation Scheme (FSCS) will raise the maximum amount of savings protected in the event of a bank, building society or credit union failure from £85,000 to £120,000 per eligible person, per UK-authorized firm.

In addition, the protection available for certain “temporary high balances” (for example, large sums following a house sale or inheritance) will increase from £1 million to £1.4 million, still valid for up to six months.

Why the Change?

The rise is driven by inflation and a regulatory requirement that the limit be reviewed at least every five years. The Prudential Regulation Authority (PRA) consulted on an initial increase to £110,000, but after feedback and updated inflation data opted for the higher figure of £120,000.

PRA Deputy Governor Sam Woods stated: “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.”

What This Means for Savers

• The change is automatic: No action is required from eligible savers. If your deposits qualify under the FSCS scheme and you hold them in a UK-regulated bank, building society or credit union, the higher limit will apply from 1 December.

• For joint accounts: Since protection is “per eligible person”, two named persons on a joint account could have combined protection of up to £240,000 at a single eligible institution (under the new limit). However, if individual and joint accounts are held at the same institution, these may be combined for limit purposes.

• If you have a large, temporary sum (e.g., from selling your main home, inheritance, or compensation), you’ll now be protected up to £1.4 million for up to six months.

Things to Check

1. Ensure your institution is UK-authorised or regulated under the PRA and participating in the FSCS scheme. You can use the FSCS’s online tool to check.

2. Check whether your bank shares its banking licence with other brands or subsidiaries. If so, those separate brands may be treated as the same institution for FSCS limit purposes.

3. Spread deposits across institutions if your balance exceeds the limit at a single firm to ensure full protection.

4. Look out for the updated “FSCS Protected” badge, which firms have until May 2026 to display.

Broader Implications

• The increased protection limit now places the UK above the European Union’s harmonised €100,000 (~£86,000) threshold and strengthens public confidence in the banking sector.

• For banks and building societies, the increase will mean higher contributions to the FSCS levy, although the PRA estimates the added cost remains modest relative to their net income.

Final Word

For most savers, this regulatory update offers welcome reassurance. If you hold savings in the UK, this is a timely reminder to verify that your bank is FSCS-covered and to review how your deposits are held. With the new higher protection threshold, you may have more flexibility in your savings strategy especially if you were previously concerned about surpassing the old £85,000 cap.

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