UK savers are set to benefit from a sweeping boost in deposit protection, as regulators confirmed the Financial Services Compensation Scheme (FSCS) will increase its coverage from £85,000 to £120,000 per person, per bank or building society, starting December 1, 2025. This move, announced by the Prudential Regulation Authority (PRA), marks the most significant uplift since 2017 and is designed to reinforce consumer confidence in the banking system amid ongoing economic uncertainty.
The new £120,000 threshold represents a 41% jump from the previous limit, a figure that outpaces even the PRA’s initial proposal of £110,000. According to the Bank of England, this decision was made after careful consideration of the latest inflation data—currently running at 3.8%, nearly double the government’s 2% target—and extensive feedback from industry consultations. The PRA’s chief executive, Sam Woods, emphasized the importance of the update, stating, “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. Public confidence supports the strength of our financial system.”
For everyday customers, the process will be seamless. There’s no need for any action on their part; the new limit will apply automatically to all eligible accounts. The FSCS protection is calculated per person, per authorised firm—meaning that if you hold multiple accounts across different brands operated under the same banking licence, the £120,000 limit applies to the total balance across those brands. The PRA has encouraged consumers to check which brands share a licence to ensure they don’t inadvertently exceed the protection limit.
The FSCS itself is funded not by taxpayers, but through a levy on firms regulated by the PRA and the Financial Conduct Authority (FCA). This detail is crucial, as it ensures the scheme’s financial sustainability while keeping public funds out of the equation. Eric Leenders, managing director of personal finance at UK Finance, the industry’s main trade body, called the decision to adjust the limit for inflation “right” and pledged to work with regulators to ensure a smooth transition.
Consumer advocates have broadly welcomed the move. The respected group Which? described it as “a sensible decision” that bolsters trust in the financial services sector without stifling economic growth. Rocio Concha, Which?’s director of policy and advocacy, noted, “It is also a timely reminder that, at a time when the government and regulators are trying to boost economic growth, strong consumer protections needn’t hamper those aims.”
This increase isn’t limited to ordinary savings. The PRA has also confirmed that the cap for so-called ‘temporary high balances’—large sums deposited as a result of major life events such as selling a primary residence, receiving an inheritance, or getting an insurance payout—will rise from £1 million to £1.4 million. This higher threshold applies for six months from the date the funds enter the account, giving consumers extra peace of mind during life’s biggest financial moments. Notably, money received from selling a second home or a buy-to-let property won’t qualify for this protection; the rules are clear that it must be someone’s “main residence.”
Rachel Springall, a finance expert at Moneyfactscompare.co.uk, urged consumers to stay alert: “Consumers must stay vigilant on where they invest their hard-earned cash. It’s simple to recognise those institutions that are covered by the FSCS, and there is a newly designed badge to make the protection more distinctive.”
The timing of the change is particularly interesting, coming just days after the government’s autumn budget. There has been speculation that Chancellor Rachel Reeves might reduce the tax-free allowance for cash ISAs in her November 26 budget, aiming to nudge more savers toward the stock market and, by extension, British companies. The government’s broader strategy is to channel household savings into investments that support economic growth. Yet, as The Guardian reported, concerns about possible changes to ISA rules have been cited as one reason why savers have been piling billions into traditional savings accounts in recent months—£5.8 billion went into easy access accounts and £2.4 billion into cash ISAs in September alone, according to Bank of England data.
Despite all this, the new FSCS limit will be academic for many. According to a recent report by the Financial Conduct Authority, about 10% of UK adults had no cash savings at all in 2024, while the median amount held by the 90% who did save was between £5,000 and £6,000. Another survey found that the average UK saver had £16,067 in the bank in 2025. For these millions, the increased protection is reassuring, but unlikely to affect their day-to-day decisions. Still, for those with larger balances—perhaps the result of a house sale or inheritance—the new rules provide a crucial safety net.
Martyn Beauchamp, chief executive of the FSCS, summed up the sentiment: “This rise ensures that consumers can feel confident their money is safe, from the very first penny up to £120,000.” The FSCS also promises swift action in the event of a bank failure, typically returning funds to eligible customers within seven days—a speed that’s become a hallmark of the scheme’s reassurance to the public.
The FSCS scheme itself was last updated in 2017, and the current move reflects the need to keep pace with both inflation and shifting consumer needs. The PRA’s decision to exceed its original proposal, based on consultation feedback and economic data, suggests a willingness to listen to both industry and consumer voices. The updated rules also underline the UK’s commitment to maintaining a robust, trustworthy financial system—one where savers can rest easy, even in turbulent economic times.
Of course, there are nuances to be aware of. While the new limit covers deposits per person, per authorised firm, it doesn’t extend to every type of account or circumstance. Customers are encouraged to check which of their accounts are protected and to understand the rules around temporary high balances. The PRA and consumer groups alike have stressed the importance of vigilance, particularly as some banking groups operate multiple brands under a single licence.
Ultimately, the increase in deposit protection is a clear signal from regulators that safeguarding consumer savings remains a top priority. In a world where financial shocks can come out of nowhere, knowing your hard-earned money is secure—up to £120,000, no less—offers a rare bit of certainty. For UK savers, that’s a change worth celebrating.
