FSCS deposit protection to £120000-What it Means for UK Savers

The upcoming increase in FSCS deposit protection to £120,000 is an important change for UK savers.

This new FSCS deposit protection to £120000 will impact how you manage your savings. As independent financial advisers, we want to break down what it means for you.

The FSCS deposit protection of £ 120,000 will provide greater security for your savings.

From 1 December 2025, the FSCS protection increases to £120000. It rises from £85,000 to £120,000 per person, per authorised bank, building society or credit union.

Why the increase?

The deposit protection limit of £85,000 has been in place for several years.

In real terms, it has been eroded by inflation. The PRA and FSCS have concluded that raising the limit to £120,000 is necessary.

This update aims to maintain saver confidence and protect a greater share of everyday deposits. The proposal initially considered a lower rise.

However, following consultation, the final figure was increased to £120,000 to reflect FSCS deposit protection to £120,000 needs.

What exactly is changing?

• From 1 December 2025, eligible depositors can claim up to £120,000 per person, per UK-authorised firm if the institution fails and is protected by the FSCS, increasing to £ 120,000.
• The limit for temporary high balances (e.g., proceeds from a house sale, inheritance, or insurance payout) increases from £1,000,000 to £1.4 million and is protected for up to 6 months in qualifying circumstances.
• The FSCS deposit protection of £ 120,000 also covers regular deposits.
• There is no application required to benefit from the FSCS protection increase to £120000; protection is automatic where an account and provider meet the eligibility criteria.

What this means for you as a saver

For most personal savers, the higher limit provides greater peace of mind.

Deposits up to £120,000 held with a single regulated institution are now covered.

For joint accounts, the protection typically applies per eligible person. Thus, two eligible account holders could see up to £240,000 protected in total with the same provider, subject to the licensing structure.

However, if you hold sums above £120,000 under one banking license, your total protection may still be limited to £120,000, even with FSCS deposit protection to £120000.

This applies across multiple brands sharing the same license too. This licensing detail is important when deciding whether to split funds across institutions.

For business owners or individuals who maintain substantial cash reserves, the increase provides greater flexibility.

It allows consolidation of funds with fewer providers. It may reduce the need to split deposits across multiple banks purely for protection.

However, it does not remove the need for an informed review.

Read why financial planning is crucial when you’re young.

Key actions to consider

1. Check your provider’s status -confirm the institution is UK-authorised and that your account is eligible for FSCS protection.
2. Review the license structure -determine whether the brands you use operate under a single banking license (which could limit protection).
3. Decide whether to spread deposits -if you hold more than £120,000 with one firm, consider whether spreading balances across separately authorised firms is appropriate.
4. Note: temporary high balance cover -if you expect a large incoming sum (e.g. sale proceeds), check whether the £1.4m temporary cover applies and whether the qualifying conditions are met.
5. Keep records -maintain documentation showing account ownership, deposit dates, and provider information in case you need to make a claim.