Bank deposit protection limit set to rise to £110k

Sara White, Editor, Business & Accountancy Daily

Plans are afoot to increase the compensation scheme for bank deposits to £110,000 if a bank or building society fails, subject to consultation

The Prudential Regulation Authority (PRA) has proposed plans to raise the deposit protection limit of the Financial Services Compensation Scheme (FSCS) from £85,000 to £110,000.

The deposit protection limit – which represents the maximum amount of money the FSCS typically protects should a depositor’s bank, building society or credit union become insolvent – has been set at £85,000 since 2017.

The proposed increase takes into account inflation since the limit was last changed, and is designed to give consumers confidence that their money is safe if their UK-authorised bank, building society or credit union fails. If taken forward, the new limit would apply to firms that fail from 1 December 2025.

Any changes would also include an increase in the limit applicable to certain temporary high balance claims – used for qualifying life events like buying or selling a house and payouts from insurance policies – from £1m to £1.4m.

The decision to change the deposit limit has to be approved by the Treasury following the PRA consultation.

If the proposals go ahead, there will be a six-month transitional period until 31 May 2026 for firms to update their disclosure materials to allow them time to implement the proposed changes.

Sam Woods, deputy governor and CEO of the PRA said: ‘We want to support confidence in our banks, building societies and credit unions by raising the amount that people can keep in their account which is covered by the deposit guarantee scheme to £110,000 per person, so all that money is safe even if the firm fails.’

Since the FSCS was established in 2001, it has paid out over £20bn, primarily for deposit failures during the 2008 financial crisis. Last year saw compensation of £10.1m paid to depositors, primarily in relation to small credit union failures.

Martyn Beauchamp, CEO of the FSCS, said: ‘Depositor protection is what FSCS is best known for, as it covers the money held in our day-to-day current accounts and savings.

‘Consumers tell us that the existence of FSCS protection is a key driver of their trust in financial services, and this trust is in turn a critical component of stability and growth. It’s important that FSCS’s limit is reviewed to ensure it stays appropriate and relevant.’

The consultation closes for comment on 30 June 2025.