Bank of England’s Prudential Regulation Authority (PRA) has proposed increasing the Financial Services Compensation Scheme (FSCS) deposit protection limit from £85,000 ($109,944) to £110,000 ($142,281).
This move is intended to bolster consumer confidence by ensuring that deposits are safeguarded in the event of a bank, building society, or credit union failure.
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The current limit has been in place since 2017 and the proposed change reflects adjustments for inflation. If implemented, the new protection limit would apply to institutions that fail from 1 December 2025.
The proposed increase is part of a consultation on deposit protection measures, aiming to further secure the financial system and consumer deposits.
Additional proposals include raising the protection limit for temporary high balance claims, such as those associated with real estate transactions or insurance policy payouts, from £1m ($1.29m) to £1.4m ($1.81m), effective 1 December 2025.
These claims are related to significant life events that can result in temporarily elevated account balances.
The PRA is also considering rules to support the Bank Resolution (Recapitalisation) Bill, which introduces a mechanism for using FSCS funds to recapitalise failing firms, facilitating their sale or transfer.
These rules will be established once the Bill’s provisions are enacted and come into force.
PRA CEO and Prudential Regulation deputy governor Sam Woods 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.”
The FSCS, operational since 2001, has been instrumental in providing financial security to depositors, having distributed over £20bn ($25.8bn) in compensation, largely due to bank failures during the 2008 financial crisis.
In the past three financial years, the FSCS has paid out £10.1m ($13.06m), primarily to cover the insolvency of small credit unions.
Recently, the Bank of England launched the 2025 Bank Capital Stress Test for the top seven UK banks and building societies, looking to assess the banking industry’s resilience to asset price falls, deep recessions, and higher global interest rates.
