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FSCS to increase deposit protection to £120,000 – what it means for your money
Savers will soon see more of their money protected when banks fail
Customers of banks, building societies and credit unions will soon get more back if their provider goes out of business, as the Financial Services Compensation Scheme (FSCS) raises its deposit limit to £120,000 from 1 December.
The increase means a larger share of your savings will be protected if a firm fails.
Here, Which? explains what’s changing, why it’s happening now and how FSCS protection works across different financial products.
What’s changing to FSCS deposit protection?
Under the FSCS, up to £85,000 of your cash with each UK-authorised provider is currently protected if that provider fails. This will rise to £120,000 on 1 December.
The new level is higher than the £110,000 limit first proposed by the Prudential Regulation Authority (PRA) earlier this year. The PRA said the £120,000 figure reflects more recent inflation data, with prices remaining elevated throughout 2025.
The FSCS has also launched a refreshed design for its deposit-protection badge, which all covered firms must display so customers know their money is protected.
- Find out more:how FSCS protects your finances
What about larger deposits?
Protection for temporary high balances is also increasing, rising from £1m to £1.4m from 1 December.
The temporary high balances rule is designed to protect customers whose bank balances are briefly inflated by life events such as house sales, redundancy or insurance payouts. This additional protection lasts for six months.
However, proceeds from second properties or buy-to-let homes are excluded from the temporary protections – only balances relating to the sale of your main home qualify.
There is no financial limit set on compensation for temporary high balances that relate to personal injury, disability or incapacity claims.
- Find out more: do you know where your savings are really held?
Why is this happening now?
The current limit of £85,000 has been in place since 2017, with its value substantially eroded by inflation in recent years.
Goods and services worth £85,000 in 2017 were worth £114,256 in September 2025 according to the Bank of England's inflation calculator.
Inflation currently stands at 3.8% – almost double the Bank of England's 2% target.
When the PRA consulted on its proposed new limit of £110,000 earlier this year, some respondents suggested a higher limit to better reflect inflation. The PRA reviewed this feedback and noted that inflation continued to rise during the consultation period, leading to a higher limit of £120,000 being confirmed.
Do I need to worry about my bank going bust?
The FSCS came to prominence during the 2008 banking crisis, when it compensated customers of five banks to the tune of £20.4bn, including failed firms Bradford & Bingley and Icesave.
Since then, failures have been far smaller in scale, primarily affecting credit unions, with most recent examples including Tullycarnet Credit Union (November 2025), Cheshire Neighbours Credit Union (October 2025), and Waltham Forest Council Employee Credit Union (August 2025).
In a recent survey by Shawbrook Bank, 21% of savers say they refuse to save with smaller banks as it’s safer to save with well-known banks. Yet smaller banks typically offer the best rates, and if they’re covered by the FSCS, you’ll get the same protection as you would with far larger providers.
Even when the worst happens and providers go bust, the FSCS typically steps in to compensate customers within seven days.
Watch out: you could exceed the limit without realising
The FSCS limit applies per banking group, not per brand. So banks that share a licence – such as Bank of Scotland, Halifax and Lloyds – count as a single provider. If the group failed, the £120,000 limit would apply across all balances combined.
You can check the Financial Conduct Authority (FCA) Financial Services Register to see which brands share a licence.
This matters if you hold large sums or save through apps that use partner banks behind the scenes. If an app places your money with a bank you already use, your combined balance could push you over the FSCS limit without you realising.
Our recent investigation explains how partner-bank arrangements work and the pitfalls to watch out for.
Will compensation for fraud losses also rise?
The substantial increase to the FSCS compensation limit raises questions about the maximum reimbursement that can be received by victims of authorised push payment (APP) fraud. This limit also currently stands at £85,000.
Originally proposed to be £415,000 (then the limit for Financial Ombudsman Service payouts), it was slashed just before it was introduced in October 2024 by the Payment Systems Regulator (PSR) to bring it in line with the current FSCS limit – a move Which? argued strongly against.
We asked the PSR if the mandatory reimbursement limit would automatically rise in line with future rises in the FSCS limit. It told us it wouldn’t, as the two limits are set separately from each other. While the PRA sets the FSCS limit, the PSR sets the reimbursement limit.
However, the PSR says that whenever the FSCS limit changes, it will review its own maximum reimbursement limit 'within a reasonable period of time'.
An independent review of the APP mandatory reimbursement scheme is also currently underway.
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