The amount of money savers get back if their bank or building society goes bust could be raised by £25,000 later this year, under proposals being consulted on. The deposit protection limit of the Financial Services Compensation Scheme (FSCS) is currently set at £85,000 but could be increased to £110,000.
If you have a temporarily high balance – for example, because you have just sold a property or received inheritance money – you can be protected for up to £1million for up to six months. This could also be increased to £1.4million. The proposals have been put forward by the Prudential Regulation Authority (PRA) and if they go ahead, would apply from December 2025.
It would be subject to Treasury approval. The FSCS steps in to pay customers up to the limits above when a financial services firm has failed and cannot pay claims against it. The limits apply per UK-regulated financial institution, not per account you may have with a firm.
This means if you’ve saved more than £85,000 with two banks that are owned by the same group with just one authorisation, you’re only covered for £85,000 in total. If you have a joint account, up to £170,000 of your money is protected. The FSCS has a checker tool on its website so you can see if a financial institution is covered.
If your bank, building society or credit union has failed, any compensation from the FSCS will be paid automatically – you don’t need to put in a claim. However, you would need to put in a claim if related to insurance, mortgages, pensions, payment protection insurance, investments and debt management.
The proposed increase takes into account inflation since the limit was last changed, the PRA said. The FSCS has paid more than £20billion since it was set up in 2001, primarily in relation to deposit failures during the 2008 financial crisis. A total of £10.1million has been paid out in the past three full financial years, primarily in relation to small credit union failures.
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Sam Woods, deputy governor for prudential regulation and chief executive of the PRA, said: “Confidence in our financial system is an essential foundation for economic growth. 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.”
Martyn Beauchamp, chief executive 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.”
Rocio Concha, director of policy and advocacy at Which? said: “Raising the deposit protection limit is a sensible decision to support consumer confidence in the financial services industry. At a time when the Government and regulators are going for growth, this decision is a reminder that strong consumer protections and economic growth go hand-in-hand.”
Eric Leenders, managing director for personal finance at banking and finance industry body UK Finance, said: “The FSCS provides depositors with valuable protection and underpins confidence in the UK’s financial system.
“The current limit of £85,000 was set back in 2017 and so it makes sense to review it. We look forward to working with the Prudential Regulation Authority as part of their consultation into the wider FSCS deposit protection system.”
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