PRA plans to raise FSCS deposit protection limit to £110,000

The Prudential Regulation Authority (PRA) has today proposed 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 1st December 2025.

The FSCS, established in 2001, has paid compensation of £10.1 million to depositors in the past three 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.

The proposal comes as part of a wide-ranging consultation on deposit protection provided by the FSCS. 

Other proposals 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 £1 million to £1.4 million.

The PRA also plans to introduce the rules needed to facilitate the Bank Resolution (Recapitalisation) Bill, which proposes a new resolution tool enabling industry funds provided via the FSCS to be used to recapitalise a failing firm to support its sale or transfer to a bridge bank. The PRA proposes to make these rules once the relevant provisions in the Banking Resolution (Recapitalisation) Bill have been enacted and brought into force. 

Sam Woods, deputy governor for prudential regulation and CEO 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, CEO of the FSCS, commented: “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.”

Eric Leenders, managing director for personal finance at UK Finance, added: “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.”