FSCS protection rises to £120,000: what savers need to know

From tomorrow, 1^st December 2025, the Financial Services Compensation Scheme (FSCS) in the UK increases its deposit protection limit from £85,000 to £120,000. This rise in FSCS protection applies per eligible person, per banking licence and it’s the first rise in more than eight years.

This is good news for individuals and couples holding substantial cash balances and the new limit better reflects:

• Larger temporary balances held during property transactions
• Higher savings accumulated during recent years
• Inflation since the last limit was set

There are few things to be aware of, though, such as how the limit applies across multiple accounts with different banks. It’s important to understand that some bank brands operate under a single banking license.

What the £120,000 FSCS protection really means

The FSCS protects eligible deposits held with UK-authorised banks, building societies and credit unions.

The new limit provides:

• £120,000 of protection per person
• Per authorised firm (i.e. per banking licence)
• Across all accounts you hold with that banking group

This last point is important. The protection applies to your total balance held with a banking group, not to each separate account and not to each brand.

Some banking brands share the same underlying licence. If they do, your £120,000 protection is shared across all of them.

Some examples include:

• Halifax and Bank of Scotland (previously HBOS)
• HSBC UK and First Direct
• Virgin Money, Clydesdale and Yorkshire Bank

If you hold large sums with multiple banks, it’s worth checking the FSCS website to see if you’re impacted by different brands sharing the same licence.

Joint Accounts: How the FSCS protection works

Joint accounts are protected too, but the overall £120,000 limit per person, per banking license still applies.

A joint account is usually treated as being equally owned on a 50/50, unless the bank records show otherwise.

Example

Imagine that Isobel and Billy use the same bank:

• Isobel has £40,000 in a personal account
• They have £160,000 in a joint account

Their FSCS positions would be:

• Isobel: £40,000 (personal) + £80,000 (joint share) = £120,000 > fully protected
• Billy: £80,000 total > fully protected

If, however, their joint account balance was £200,000:

• Isobel’s total would be £40,000 + £100,000 = £140,000 > £20,000 above the FSCS protection limit
• Billy would still be within his own £120,000 limit

So although a two-person joint account can be protected up to £240,000 in total, each person’s own £120,000 cap applies across both their personal and joint holdings with the same bank.

Temporary High Balances

Another increase in the FCSC protection is the lesser-known enhanced protection for temporary high balances.

From 1 December 2025, the limit has increased from £1 million to £1.4 million.

It covers money received from major life events, such as:

• Selling your home
• Divorce settlements
• Inheritance
• Redundancy payments
• Insurance payouts
• Compensation awards

Temporary High Balance protection sits on top of the standard £120,000 limit and applies for 6 months after the money arrives in your bank account.

What Happens if a Bank or Building Society Fails?

Bank failures in the UK are very rare, but they can happen. You might remember images on the news of the bank run on Northern Rock from 2007 and the near-collapse of Halifax Bank of Scotland (HBOS) and The Royal Bank of Scotland.

So what actually happens in these extreme events?

1. Regulators step in quickly

If a bank becomes non-viable, the Bank of England and Prudential Regulation Authority (PRA) intervene.

2. The bank enters “resolution”

Depending on the situation, regulators may:

• Transfer customer accounts to another bank, or
• Close the bank and trigger FSCS compensation

3. FSCS refunds customers automatically

You don’t need to make a claim for protected deposits. The FSCS receives customer records directly and issues compensation automatically.

4. How long will you wait to get your money back?

The FSCS aims to refund:

• Most depositors within 7 days
• More complex cases could take up to 3 months, including compensation for temporary high balances

5. What about amounts above £120,000?

Balances over the FSCS protection limit may be at risk. In some cases, administrators recover a percentage of deposits over time, but there’s no guarantee.

This is why spreading large sums across multiple licensed banks can make sense.

What About Pensions and Investments?

Although this article focuses on deposit protection, it’s useful to know that the FSCS also provides protection for pensions and investments:

Pensions

• Many pensions operate under trust structures, keeping assets separate from the provider
• FSCS may cover provider failures or bad advice
• Protection is usually up to £85,000 per person, per firm for investment-based pensions
• Some insurance-based pensions benefit from 100% protection

Investments

• FSCS protection applies if a regulated investment firm fails (not if you lose money due to a fall in the stockmarket)
• Limit: £85,000 per person, per firm

This mechanics behind this type of protection can be complex, but knowing the basics can offer reassurance. If you’d like to read more about the protection of investments, you’ll find more information on the FSCS website.

Practical Steps

So, what actions should you consider to ensure your money stays protected?

• Check if any of the banks you use share a licence
• Spread savings across different bank if holding over £120,000
• Understand that your £120,000 FSCS protection is shared across personal and joint accounts with the same bank.
• Be aware of Temporary High Balance rule, which offers up to £1.4 million of protection after certain life events, for 6 months

The increase in FSCS protection to £120,000 is a positive change for savers. Although the likelihood of a UK bank collapse remains low, knowing how protection works can make a real difference to your financial confidence.

If you’d like help reviewing how your cash, pensions or investments sit within your wider financial plan, why not get in touch?