Customers of UK banks and building societies will soon benefit from a significant increase in the amount of money protected if their bank fails, after regulators confirmed that the Financial Services Compensation Scheme (FSCS) deposit limit will be increased from £85,000 to £120,000.
The change announced by the Prudential Regulation Authority (PRA) represents the largest increase since 2017 and reflects updated inflation data and industry feedback. It will come into force in December, with customers automatically covered – no action required from account holders.
Martyn Beauchamp, chief executive of the FSCS, said the increase would give consumers greater certainty at a time of economic uncertainty.
“This increase ensures consumers can be confident that their money is safe from the first penny up to £120,000,” he said.
The FSCS protects deposits per person and per authorized company, meaning multiple accounts held under the same banking license will share the £120,000 limit. Several major banks operate multiple brands under a single license – a detail the PRA is encouraging consumers to review.
Sam Woods, deputy governor for prudential regulation at the Bank of England and CEO of the PRA, said the reform strengthens financial stability and public confidence.
“This change will help maintain the public’s confidence in the safety of their money,” he said. “Depositors will be protected up to £120,000 should their bank, building society or credit union fail.”
Consumer groups welcomed the move. Which? described it as a “sensible decision” that boosts confidence 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 hinder these goals.”
Industry representatives also supported the decision. Eric Leenders, managing director of personal finance at UK Finance, said adjusting the inflation limit was “right” and the sector would work with regulators to ensure a smooth implementation.
As part of the same update, the PRA confirmed an increase to the temporary maximum balance cap – which protects large sums arising from major life events such as home sales, inheritances or insurance payouts. This limit increases from £1 million to £1.4 million and applies for six months from the moment the balance is credited to the account.
The FSCS is funded by a levy on PRA and FCA regulated companies, rather than taxpayers.
