By Heather Bright, Partner
Protecting your money is critical to your future financial success and nowhere is this truer than the money you keep in the bank.
That is why many savers will be pleased to learn that from 1 December 2025, UK bank customers will benefit from a significant uplift in the deposit protection limit under the Financial Services Compensation Scheme (FSCS).
It have been confirmed by the Prudential Regulation Authority (PRA) that that the FSCS will now protect up to £120,000 of a depositor’s money in the event of a bank, building society or credit union failure – up from the previous £85,000 limit.
Why the sudden change you may ask? Inflation.
It is good to see that the PRA is taking steps to reflect the changes that many of us have already felt by extending the protection available via the accounts that we use daily.
A step towards greater consumer protection
By adjusting the limit to £120,000, the PRA is ensuring that consumer protections remain in line with economic realities, providing an essential safety net for individuals should their bank or financial institution face difficulties.
This move is also part of a broader effort to modernise the regulatory framework surrounding the financial services industry.
As economic conditions evolve, it is vital for regulations to adapt, keeping pace with inflation, changing consumer behaviours, and shifting market dynamics.
By updating the FSCS deposit protection limit, the PRA is not only responding to inflation but also reinforcing the stability and strength of the UK financial system.
What does this mean for UK bank customers?
In the unlikely event that a bank or financial institution collapses, depositors will now be entitled to compensation for deposits up to £120,000.
This increase ensures that a wider range of savings will be protected, especially for individuals with larger sums in their accounts.
The rise in the FSCS limit also includes an increase in the protection available for temporary high balances, which typically apply in life event scenarios such as purchasing a property or receiving insurance payouts.
This temporary high balance protection limit will increase from £1 million to £1.4 million, further extending the safety net for individuals undergoing significant financial transitions.
Supporting the future of financial services
The increase in the FSCS deposit protection limit is part of a series of regulatory updates aimed at ensuring that the UK’s financial services sector remains fit for the modern era.
These updates also include revisions to the FSCS disclosure materials, which will provide clear and up-to-date information for depositors.
Whilst we don’t directly provide financial services to you, as accountants we think it is important that we highlight these upcoming changes to you.