'Great news for savers' as customer protection limit rises to 120,000

The protection covers deposits held with UK-authorised banks, building societies and credit unions that cease trading. The existing threshold has remained unchanged since 2017.

The finalised amount exceeds an earlier PRA consultation proposal of £110,000. Officials adjusted the figure upwards after considering industry feedback and recent inflation figures.

The scheme ensures individual depositors receive compensation on a per-person, per-institution basis when financial providers collapse.

Depositors need take no action to benefit from the enhanced coverage, which takes effect automatically. The FSCS typically returns funds to affected customers within a week of an institution's failure.

Savers must remain vigilant about banking group structures, however. Multiple brands often operate under a single banking authorisation, meaning the £120,000 ceiling covers the combined total across all accounts within that group.

Kevin Mountford, co-founder and personal finance expert at Raisin UK, said: "The increase in FSCS protection from £85,000 to £120,000 is great news for savers and frankly long overdue. The previous limit was set back in 2017, so this rise is a much-needed update that reflects both inflation and the growing size of people’s savings pots. It’s a positive move that will help restore confidence in the system at a time when financial security is front of mind for many households.

"But this announcement should also serve as a wake-up call. Savers with larger balances need to make sure their money is properly protected. The FSCS limit applies per bank, per person, so spreading funds across multiple institutions is still the best way to ensure full coverage. Platforms like Raisin UK make that process simple by allowing customers to manage accounts from different FSCS-protected banks in one place, removing the hassle and keeping every pound safe."

Customers maintaining deposits with different banks belonging to the same financial group face particular exposure. The compensation scheme treats these as a single claim rather than separate protections for each brand.

Account holders should verify whether their various banking relationships involve shared licences to understand their actual coverage limits.

Sam Woods, deputy governor for prudential regulation at the Bank of England and chief executive of the PRA, stated: "This change will help maintain the public's confidence in the safety of their money.

It means that depositors will be protected up to £120,000 should their bank, building society or credit union fail. Public confidence supports the strength of our financial system."

FSCS chief executive Martyn Beauchamp welcomed the announcement, saying: "This rise ensures that consumers can feel confident their money is safe, from the very first penny up to £120,000.

At FSCS, we know that trust in financial services is vital for stability and growth. This enhanced protection will reassure consumers and support confidence in the UK's financial system."

Consumer advocate Rocio Concha from Which? described the increase as "a sensible decision to support consumer confidence in the financial services industry".

She added: "It is also a timely reminder that, at a time when the Government and regulators are trying to boost economic growth, strong consumer protections needn't hamper those aims."

Eric Leenders, managing director of personal finance at UK Finance, noted: "The FSCS provides depositors with valuable protection as they know their money is safe.

As the current limit of £85,000 was set back in 2017, it is right to update it to take account of inflation." He pledged the trade body would assist members with implementation and customer communications.