From 1 December 2025, the Financial Services Compensation Scheme (FSCS) deposit protection limit rose from £85,000 to £120,000 per eligible person, per authorised institution.
This is the first increase to the FSCS limit since 2017 and reflects the impact of inflation over the intervening years. The change means that savers now have greater protection for their cash deposits, providing additional confidence in the security of their money.
Understanding how this protection works and what it means for your savings strategy is important for ensuring your money remains safe.
What Is the FSCS?
The Financial Services Compensation Scheme is the UK’s statutory deposit guarantee scheme. It was set up by the government in 2001 to protect consumers if authorised financial firms fail.
If a UK-authorised bank, building society, or credit union goes out of business and cannot pay back customers’ deposits, the FSCS steps in to compensate eligible depositors. This protection is automatic – you do not need to apply for it or pay for it.
The FSCS operates independently but is overseen by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA). The scheme is funded by levies on the financial services industry, not by taxpayers.
In the unlikely event that a bank or building society fails, the FSCS aims to return protected deposits to customers within seven working days. This quick turnaround is designed to minimise disruption and ensure people continue to have access to their money.
Why Has the Limit Increased?
The deposit protection limit had been set at £85,000 since January 2017. Over the past eight years, inflation has eroded the real value of this protection, meaning that £85,000 today buys considerably less than it did in 2017.
Under the Deposit Guarantee Scheme Regulations 2015, the PRA is required to review the deposit protection limit at least every five years. Following a consultation in early 2025, the PRA confirmed that the limit would increase to reflect inflation since the last review.
The increase to £120,000 is designed to maintain the real value of protection for savers and ensure that confidence in the UK financial system remains strong. Originally, the PRA proposed raising the limit to £110,000, but this was increased to £120,000 following feedback during the consultation period.
How Does the Protection Work?
The FSCS protection limit applies per eligible person, per authorised institution. This means that if you have £120,000 or less with a single bank or building society, all of your money is protected.
If you have accounts with multiple institutions that operate under different banking licences, you receive £120,000 of protection with each one. For example, if you have £120,000 with Bank A and £120,000 with Bank B, both amounts are fully protected.
However, it’s important to understand that some banks are part of the same banking group and share a licence. In these cases, the £120,000 limit applies to the total amount you hold across all brands within that group, not to each individual brand.
For example, First Direct and HSBC share a banking licence, so if you have money with both, your total protection is capped at £120,000 across both accounts combined. You can check which banks share licences using tools available on the FSCS website.
Joint Accounts
Joint accounts benefit from double protection because the limit applies to each eligible person. This means a joint account with two account holders is protected up to £240,000.
However, this does not mean you get extra protection overall. If you have both an individual account and a joint account with the same institution, you still only receive one lot of £120,000 protection for your individual holdings. The joint account receives separate protection because it includes another person’s money.
For example, if you have £100,000 in your sole name and £50,000 in a joint account with your spouse (where your share is £25,000), your total individual protection covers £125,000. The first £120,000 is protected, but £5,000 would be at risk if the institution failed.
Temporary High Balances
The FSCS also provides additional protection for temporary high balances that result from specific life events. These might include receiving proceeds from selling your home, an inheritance, a redundancy payment, an insurance payout, or compensation for personal injury.
From 1 December 2025, temporary high balance protection has increased from £1 million to £1.4 million. This enhanced protection applies for up to six months from the date the money was first deposited.
You do not need to do anything to activate this protection, but if your bank were to fail during the six-month period, you would need to provide evidence of where the funds came from to claim the higher level of compensation.
This provision is particularly valuable during major life transitions when you may temporarily hold more cash than usual while you decide how to deploy it. It provides peace of mind that these significant sums remain protected during this interim period.
Checking Your Protection
It’s important to verify that your bank or building society is covered by the FSCS. Most major UK banks and building societies are, but you should check to be certain.
You can use the Financial Services Register on the FCA website to confirm that your provider is authorised. Look for the firm’s name and check that the six-digit Financial Services Register Number (FRN) matches the one displayed on the bank’s own website.
FSCS-protected institutions will also display the FSCS logo on their websites, in branches, and in account documentation. From May 2026, a new version of the FSCS badge will be rolled out, so you should start seeing the updated logo appearing on materials.
If you have any doubts about whether your savings are protected, contact your provider directly or visit the FSCS website for guidance.
What About Investments?
The FSCS also protects investments, but the rules and limits differ from those for deposits. If an investment firm fails, you may be able to claim compensation of up to £85,000.
Importantly, the investment protection limit remains at £85,000. This is separate from the deposit protection limit, so if you have both cash deposits and investments, you receive £120,000 protection for deposits and £85,000 protection for investments with each authorised firm.
It’s also important to understand that FSCS protection for investments does not cover poor investment performance or market losses. It applies only if the investment firm goes out of business and cannot return your assets or funds.
The Bigger Picture
While the likelihood of a UK bank or building society failing is relatively low, the FSCS provides an important safety net that helps maintain confidence in the financial system. Knowing that your money is protected helps you save with peace of mind.
As you review your savings against the new limits, it’s worth considering your overall financial position. Are you making the most of tax-efficient savings options, such as ISAs? Do you have an emergency fund in place? Are your savings working as hard as they could be?
The increase in FSCS protection to £120,000 provides greater security for savers and reflects the ongoing commitment to maintaining robust protections in the UK financial system. Taking a few moments to review your arrangements can ensure your money remains safe and your savings strategy is fit for purpose.
Please don’t hesitate to contact a member of the team if you would like to discuss your savings strategy and how the new FSCS limits affect you.
The content in this article was correct on 16/02/2026.
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The Financial Conduct Authority does not regulate Tax Planning
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