Customers of UK banks and building societies will benefit from a major increase in deposit protection after regulators confirmed the Financial Services Compensation Scheme (FSCS) limit will rise from £85,000 to £120,000. The change, announced by the Prudential Regulation Authority (PRA), takes effect in December and applies automatically to account holders.
The FSCS protects deposits per person, per authorised firm, meaning that multiple accounts held under the same banking licence share the £120,000 limit. Several major banks operate multiple brands under a single licence, and the PRA encourages consumers to check which accounts are covered.
Martyn Beauchamp, chief executive of the FSCS, said the increase provides stronger reassurance to consumers amid economic uncertainty. “This rise ensures that consumers can feel confident their money is safe, from the very first penny up to £120,000,” he said.
Sam Woods, deputy governor for prudential regulation at the Bank of England and CEO of the PRA, described the update as a measure to bolster financial stability and public confidence. “Depositors will be protected up to £120,000 should their bank, building society, or credit union fail,” he said.
Consumer groups welcomed the change. Which? described the adjustment as a “sensible decision” that strengthens trust in the financial services sector without restricting economic growth. Rocio Concha, the group’s director of policy and advocacy, said the increase was “a timely reminder that strong consumer protections need not hamper those aims.”
Industry representatives also backed the decision. Eric Leenders, managing director of personal finance at UK Finance, said updating the limit for inflation was “right” and confirmed the sector would work with regulators to ensure smooth implementation.
The PRA also announced an increase in the temporary high balance cap, which protects large sums of money resulting from major life events such as house sales, inheritances, or insurance payouts. The cap will rise from £1 million to £1.4 million and will apply for six months from the point the funds enter the account.
The increase to the deposit limit represents the largest uplift since 2017 and reflects both updated inflation data and feedback from industry participants. Beauchamp highlighted that the FSCS is funded through a levy on PRA- and FCA-regulated firms, rather than through taxpayer money.
The updated protections aim to give depositors greater peace of mind, encouraging confidence in the UK banking system while ensuring consumers are safeguarded against unexpected bank failures.
