Financial Services Compensation Scheme limit rises to £120,000

After much anticipation, the Financial Services Compensation Scene (FSCS) has announced an update to their deposit protection limit, marking the first increase to the limit in eight years.  

The amount of money a customer can have protected in the event that a UK bank, building society or credit union fails will increase to £120,000 next month, offering a boost to savers across the country.

The updated deposit protection limit, which represents a 41% rise from the current £85,000 cap, comes into effect on 1 December 2025 and is higher than originally expected.

The initial plan was to raise the protected amount to £110,000. However, this is one of the few areas where consumers appear to be gaining from the fact that UK inflation, which currently sits at 3.8%, remains well above the Bank of England’s 2% target.

In announcing the change, the Bank of England’s regulatory body, the Prudential Regulation Authority, said the proposed £110,000 limit had been revised upwards “in light of consultation feedback and to reflect the latest inflation data”.

What is the deposit protection scheme?

The FSCS protects 100% of the first £85,000 you have saved (£120,000 after 1 December 2025), per UK-regulated financial institution (not per account). So in simple terms, if your bank were to fail, the FSCS aims to get any savings up to this amount back to you within seven working days.

Aside from protecting funds, the FSCS was created to prevent ‘bank runs’ - where many depositors attempt to withdraw their funds at the same time. No bank has enough liquidity to pay/repay all its deposits at once, so if someone thinks other depositors might withdraw soon, it is rational for them to do it first as a kind of pre-emptive measure, which can lead to a cascade of withdrawals that results in a ‘bank run’. The existence of deposit protection – like an insurance scheme - serves to break this reasoning.

Since the £85,000 FSCS limit was set in 2017, consumer prices have increased more than 40%, meaning the same £85,000 buys a lot less. Moreover, the total amount of bank deposits has broadly doubled since 2017. The FSCS hopes that the limit increase to £120,000 will better represent current value.  
 
Understanding what kind of protections are available to you is key to proper financial planning. With the uncertainty in the global economy right now, it’s more important than ever to seek financial planning advice to help safeguard your future.  

If you want to find out more, why not give us a call on 0333 323 9060 or book a free non-committal initial consultation with one of our chartered advisers to find out how we can help. 

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This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions. The Financial Conduct Authority (FCA) does not regulate cash advice.