FSCS Protection Rises to £120,000: What UK Savers Need to Know

The Financial Services Compensation Scheme (FSCS) protection limit — the amount of money guaranteed if a UK bank or building society collapses — will rise sharply from £85,000 to £120,000 per person, per firm on 1 December 2025.

The increase, announced by the Bank of England’s Prudential Regulation Authority (PRA), represents a 41% jump and is the first adjustment in eight years. It’s also higher than the originally proposed £110,000, with regulators citing inflation and consultation responses behind the decision.

What the new £120,000 limit means

From 1 December, if a UK-authorised bank, building society or credit union fails, eligible customers will be compensated up to the new £120k limit. As with the current system, payouts are expected to be made within seven days of a failure — meaning your money should remain accessible even during a bank collapse.

For many savers, the change won’t fundamentally alter how they manage their money. In 2024, the Financial Conduct Authority found that while 90% of UK adults had some savings, the median balance was between £5,000 and £6,000. However, for savers holding high balances — especially after the recent surge in easy-access deposits — this increase adds meaningful protection.

Temporary high balances also rise

The PRA has also increased FSCS protection for temporary high balances — large sums received due to major life events such as:

• Selling your main home

• Inheritance

• Insurance payouts

• Redundancy payments

• Retirement lump sums

• Personal injury settlements

From December, this protection increases from £1 million to £1.4 million, and remains in place for six months from the date the money is received. Note: proceeds from selling a second home or buy-to-let property are not covered.

Why this matters now

The timing is significant. Chancellor Rachel Reeves delivers the Budget on 26 November, and there is widespread speculation that she may reduce tax advantages on cash ISAs to encourage more investment into UK companies.

Combined with high inflation and economic uncertainty, savers have been piling money into accounts at record levels — with £5.8bn flowing into easy-access accounts in September alone. Higher FSCS coverage may further increase the attractiveness of keeping cash in bank accounts rather than moving it into investments.

Will the new limit change saver behaviour?

Potentially. The higher £120k cap could encourage wealthier savers and small businesses to consolidate more of their cash in regulated UK banks. It may also reduce the need for people to spread money across multiple institutions solely to stay under the £85k limit.

However, for many savers using tools like DepositScout to find the best rates, splitting money across several providers will still be useful — not just for protection, but to access higher interest rates.

DepositScout’s view

This is a welcome and long-overdue update that strengthens confidence in the UK banking system. With savings rates shifting weekly and major Budget changes ahead, understanding how to keep your money protected is just as important as finding a competitive interest rate.

DepositScout will continue tracking the best FSCS-protected savings accounts — including easy-access, fixed-rate, and ISA options — so you can spread your money safely and earn the best return.