Savings protection limit could be increased to £110,000 later this year
The deposit protection limit for savers if their bank or building society fails could be raised by £25,000 later this year, under proposals being consulted on.
The Bank of England's Prudential Regulation Authority (PRA), which supervises financial institutions, has proposed increasing the depositprotection limit of the Financial Services Compensation Scheme (FSCS) from its current level of £85,000 to £110,000.
The FSCS protects customers of financial services firms that have failed. If a firm has gone bust and cannot pay claims against it, the scheme can step in to pay compensation.
The deposit protection limit represents the maximum amount of money the FSCS typically protects should a bank, building society or credit union become insolvent. It 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, the PRA said.
If taken forward, the new limit would apply to firms that fail from December 1 2025.
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.
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'It's important that FSCS's limit is reviewed to ensure it stays appropriate and relevant.'
The UK Government has put a strong focus on economic growth in its plans.
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.'
The FSCS has paid £10.1 million to depositors in the past three full financial years, primarily in relation to small credit union failures.
Since it was set up in 2001, the FSCS has paid more than £20 billion, primarily in relation to deposit failures during the 2008 financial crisis.
The proposal is part of a wider consultation on FSCS deposit protection.
Other proposals include increasing the limit applicable to certain temporary high-balance claims – which may be used for certain life events such as buying or selling a house and payouts from insurance policies – from £1 million to £1.4 million. This could also take effect from December 1 2025.
Consultation responses in relation to the proposals around the limit of protection available from the FSCS are requested by June 30 2025.
The PRA expects to confirm the outcome of its consultation in November 2025, with any change to the deposit protection limit needing approval from the Treasury.
Deposits are protected up to the protection limit that is in effect at the time of the failure of a firm.
The protection limit is provided on a per person and a per PRA-authorised institution basis. Spreading money around across a range of authorised firms can help savers with bigger balances to ensure that their money is protected.
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