FSCS protection limit increase

How does FSCS protection work?

FSCS protection covers deposits held in banks, building societies, and credit unions that are authorised by the Prudential Regulation Authority (PRA) and regulated by the Financial Conduct Authority (FCA). If an authorised institution fails and cannot return a customer's money, the FSCS steps in to compensate eligible depositors up to a specified limit per person, per institution.

This coverage applies to a wide range of deposit accounts, including current accounts, savings accounts, and cash ISAs.

It's important to note that some banks operate under the same banking licence, meaning your FSCS protection applies to the total amount held across both brands, not to each separately. For example, Halifax and Bank of Scotland are both part of Lloyds Banking Group and share the same banking licence. Therefore, if you have accounts with both Halifax and Bank of Scotland, your combined deposits are protected up to the FSCS limit for a single institution, not double.

New FSCS protection limits from 1 December 2025

Until 30 November 2025, the FSCS protection limit stood at £85,000 per person, per authorised institution. This meant if your bank, building society, or credit union failed, you could claim up to £85,000 of your eligible deposits back. For joint accounts, the limit was £170,000, double the individual allowance.

As of 1 December 2025, the FSCS deposit protection limit will rise to £120,000 per person, per institution. This significant increase is designed to offer greater peace of mind to savers and reflects inflation and changes in the financial landscape. For joint accounts, the new limit is £240,000.

How and when can you claim FSCS compensation?

If your bank, building society, or credit union goes out of business and cannot return your money, the FSCS will automatically compensate eligible depositors up to the protection limit. The FSCS aims to return funds within seven days of a failure for deposits.

You do not need to apply or fill out lengthy forms in most cases; the compensation process is generally automatic, using the records held by the failed institution. The FSCS will contact eligible customers directly with details about their compensation.

It is important to keep your contact details up to date with your bank or building society to ensure you can be reached if compensation is due.

What If your savings exceed the FSCS limit?

With the increase to £120,000 per person, per institution, many savers will enjoy enhanced protection. However, those with larger cash holdings may still find their savings exceed the FSCS limit. In such cases, spreading funds across different authorised institutions can help ensure that all your money is covered.

FSCS also cover temporary high balances, which will also rise from December, of up to £1.4 million. These may occur from major life events, such as selling a home or receiving an inheritance. Temporary high balances are protected for up to six months.

For those with substantial savings, it's also worth considering National Savings & Investments (NS&I). NS&I is backed by HM Treasury, meaning all money deposited with NS&I is 100% guaranteed by the UK Government, with no upper limit. This makes NS&I one of the safest places for savers with amounts well above the FSCS limit.

What about protection against failing Investment Providers

The FSCS does provide protection for certain types of investments in addition to cash-based institutions. If an authorised investment firm fails and cannot return your assets, the FSCS may compensate you for financial losses resulting from bad advice, mismanagement, or fraud, up to a limit of £85,000 per person, per firm. It's important to note that FSCS protection does not cover investment performance losses or normal market fluctuations, only situations where it can be evidenced that bad advice was provided or the provider is unable to meet its obligations due to insolvency or similar reasons.

Unlike the deposit protection limits, the FSCS will not compensate you for failed investment companies at the higher £120,000 level; it will remain at £85,000.

Key takeaways

• The FSCS protects deposits with UK banks, building societies, and credit unions.
• The current protection limit is now £120,000 per person, per institution.
• Compensation is automatic in the event of a failure, usually within seven days.
• Savers with large balances should consider spreading funds or using NS&I for full government protection.

The increase in the FSCS limit is a welcome move for UK savers, offering increased peace of mind and greater protection for your hard-earned money. Stay informed about your savings arrangements and consider your options to make the most of the new protection levels that came into force from December 2025.