The Prudential Regulation Authority (PRA) is proposing 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. If taken forward, the new limit would apply to firms that fail from 1 December 2025.
Sam Woods, deputy governor for prudential regulation and CEO of the PRA says: “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.”
The FSCS, established in 2001, has paid compensation of £10.1 million to depositors in the past three full financial years, primarily in relation to small credit union failures. Since it was established, the FSCS has paid over £20 billion, primarily in relation to deposit failures during the 2008 financial crisis.
Rocio Concha, Which? director of policy and advocacy, comments: "Raising the deposit protection limit is a sensible decision to support consumer confidence in the financial service 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."
The proposal comes as part of a wide-ranging consultation on deposit protection provided by the FSCS. This also includes an increase in the limit applicable to certain temporary high balance claims - used for specific events like buying or selling a house and payouts from insurance policies - from £1 million to £1.4 million, with effect from 1 December 2025.
The PRA is also considering diverting funds provided through the FSCS scheme to recapitalise a failing bank to support its sale or transfer to a bridge bank.