Financial Services Compensation Scheme (FSCS) increased the deposit protection limit on 1 December 2025, from £85,000 to £120,000. This uplift was a result of the Prudential Regulation Authority’s (PRA) consultation in March 2025, which explored modernising regulatory frameworks to reflect current economic conditions and improve consumer protection.
This increase can therefore be attributed to the need for updated regulation that better aligns with higher inflation and broader economic pressures. Sam Woods, CEO of the PRA, commented: ‘This change will help maintain the public’s confidence in the safety of their money.’ This additional protection reassures consumers and strengthens public trust and stability in the UK’s financial system.
The PRA reviews the FSCS deposit protection limit periodically, and at least once every five years, in accordance with the Deposit Guarantee Scheme Regulations 2015. This ensures that the limit stays in line with inflation and maintains consumer confidence in the scheme.
What is FSCS and Deposit Protection?
FSCS was created under the Financial Services and Markets Act 2000. It operates independently, with oversight from the PRA and the Financial Conduct Authority (FCA). The purpose of the organisation is to protect consumers when financial firms fail.
The deposit protection ensures that each eligible depositor is protected up to a certain amount (currently £120,000), should their bank, building society or credit union fail. The scheme is government-backed, which helps maintain consumer trust.
If the authorised firm becomes insolvent and cannot return customers’ money, the FSCS compensates those customers up to the deposit protection limit. This protection limit applies to each firm authorised by the PRA and FCA. Where deposits are spread across multiple brands sharing a single banking licence, the deposits are aggregated for compensation purposes.
The deposit protection can cover multiple accounts within each authorised firm, including, for example:
- Current accounts
- Savings accounts
- Cash ISAs
- Savings Bonds.
The protection limit for investments remains at £85,000 per authorised firm. However, it is worth emphasising that the level of protection varies depending on the type of investment product, with certain products not being protected at all, such as cryptoassets and unregulated collective investment schemes.
FSCS may also provide compensation for products and services relating to insurance policies, mortgages, payment protection insurance, pensions, funeral plans and debt management plans.
Compensation for deposit claims will be paid automatically within seven working days of a bank, building society or credit union failing. The process and timeline may vary depending on the complexity of the claim, such as for those involving temporary high balances. FSCS will usually liaise with the insolvency practitioner handling the failed firm to verify deposit information and confirm eligibility. During a failed event, FSCS publishes guidance online to inform customers of the steps they need to take, if any.
There are no fees imposed on consumers for compensation claims, as FSCS is funded through annual levies charged to firms authorised by the PRA and FCA. These levies cover the cost of maintaining the scheme and meeting any compensation obligations. The levies are calculated annually based on budget requirements and the estimated cost of compensation claims.
Protection for Businesses
Businesses can also benefit from the deposit protection, but this will depend on the type and structure of the business. For example, subject to any excluded category, each separate legal entity (e.g. LLP, limited company) can claim up to £120,000 per authorised firm.
However, for sole traders, business and personal deposits are aggregated, resulting in one combined protection limit of £120,000 being applied per authorised firm.
Temporary High Balances
FSCS can, in some circumstances, compensate more than the standard deposit protection limit through its temporary high balances. These apply where large sums are held as a result of a qualifying life event, such as selling a property, divorce or dissolution of a civil partnership, and receiving an inheritance or insurance payout. This enhanced protection lasts for up to six months from the date the funds are credited to the account.
The temporary high balance limit also increased on 1 December 2025 as part of the changes, from £1m to £1.4m. This provides substantial short-term protection for individuals dealing with significant financial transactions. There is no upper limit for temporary high balances linked to personal injury, disability or incapacity claims.
Which banks, building societies and credit unions are included?
As mentioned previously, banks, building societies and credit unions need to be authorised by the PRA and FCA to be protected under the scheme. FSCS provides an online tool for consumers to check whether the firm is covered and which brands share a banking licence.
This is particularly important because many well-known brands operate under the same banking licence. Depositors who are unaware of this may unintentionally exceed the protection limit.
Historical Limits
| Date (From) | Date (To) | Compensation Limit |
| 30/01/2017 | 30/11/2025 | £85,000 |
| 01/01/2016 | 29/01/2017 | £75,000 |
| 31/12/2010 | 31/12/2015 | £85,000 |
| 07/10/2008 | 30/12/2010 | £50,000 |
| 01/10/2007 | 06/10/2008 | £35,000 |
| 01/12/2001 | 30/09/2007 | £31,700 |
This table illustrates that FSCS are entitled to reduce the compensation limit. While reductions are infrequent, it highlights the importance of staying informed and reviewing your banking arrangements to ensure ongoing protection.
Joint Accounts
The deposit protection limit applies per person, per authorised firm. This means that if a joint account is held, each eligible account holder is protected up to £120,000. Of course, if a joint account holder has multiple accounts with the same authorised firm, only a single protection limit is available as the amounts are aggregated.
Disadvantages
Where money is held across multiple brands that are part of the same banking group, and which share the same banking licence, only one deposit protection limit applies. For example, First Direct is a division of HSBC UK Bank plc and shares the same banking licence. The consequence of this is that only one compensation limit applies across these brands.
Consumers must familiarise themselves with FSCS’s terms and eligibility requirements, as various restrictions and limitations apply for each category. For example, proceeds from the sale of a house under the enhanced temporary high balance protection only applies for residential properties. Therefore proceeds from the sale of a second home or buy-to-let property do not qualify. Another example shows that if a joint account is held by a general partnership, only one deposit protection limit applies, regardless of the number of partners.
Conclusion
The increase of the FSCS deposit protection limit to £120,000 represents a strengthening of consumer safeguards in an evolving economic climate. While FSCS provides protection, consumers must keep under review which firms share banking licences and the level of coverage available.
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