Jasmine Birtles
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New UK Savings Rule: Deposit Protection Raised to £120,000 – What Savers MUST Know Now
Vicky Parry
18th Nov 2025
Brits Get a Savings Safety Boost: Deposit Protection Limit Rises to £120,000
In a major win for UK savers, the Government and regulators have confirmed that from 1 December 2025, the Financial Services Compensation Scheme (FSCS) deposit protection limit will increase from £85,000 to £120,000 per person, per authorised institution.
This is the first uplift since 2017 and reflects rising living costs, larger average savings pots, and the need to keep consumer protection in line with inflation.
The change happens automatically, so savers don’t need to opt in — but it does mean now is the perfect time to reassess how your money is spread across banks and building societies.
What Does the New £120,000 Protection Cover?
The FSCS exists to protect consumers if a bank, building society or credit union collapses. Under the new rules, it will guarantee up to:
✅ £120,000 per person, per authorised bank/building society
This means if your bank goes under, the FSCS refunds up to £120,000 of your cash savings.
✅ £240,000 protection for joint accounts
Joint account holders each receive £120,000 protection.
✅ £1.4 million protection for “Temporary High Balances”
Some life events allow much higher protection for up to six months, including:
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House sale proceeds
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Divorce settlements
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Redundancy payments
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Compensation payouts
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Inheritance
This limit is rising from £1 million to £1.4 million, giving breathing room for anyone who is temporarily holding large sums.
Why Is This Happening Now?
The previous £85,000 cap was introduced in 2017. Since then:
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Inflation has eroded the real value of savings
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House prices and transactions have risen
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More savers are holding larger cash pots due to economic uncertainty
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Regulators want to strengthen public confidence in the financial system
The move brings the UK more in line with international standards and reduces the risk of “quiet panic” during periods of financial instability.
What You Need to Check — Today
Even though the protection is automatic, your money may not be as protected as you think.
1. Do your banks share a licence?
Some brands operate under the same banking authorisation.
This means:
NatWest + RBS
Halifax + Lloyds + Bank of Scotland
HSBC + First Direct
…share a single £120k cap.
If you have multiple accounts under one licence, your total protection is still only £120,000.
2. Are you holding more than £120,000 anywhere?
If so, it may be time to spread funds across separate authorised institutions.
3. Expecting a house sale or inheritance?
The higher £1.4m temporary limit helps — but it lasts only six months.
Make a plan early.
4. Double-check savings apps and digital banks
Many fintechs partner with licensed banks behind the scenes.
Always check the “Who is my money held with?” section.
Good news for savers
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If you currently hold savings in a UK-authorised bank, building society or credit union, you’ll automatically benefit from the higher protection from 1 December – no action required.
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The higher figure gives extra headroom for those holding substantial deposits, for example older savers, or people awaiting a payout from a transaction.
Important things to check
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The cap is per person, per authorised institution. That means if you hold accounts with multiple brands that operate.
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For the “temporary high balances” category, ensure you meet the conditions (such as life-event triggers and the six-month timeframe) to benefit from the higher £1.4 million limit.
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The change applies if the bank/building society/credit union fails after the new rules come into effect. It does not change the protection level retrospectively for past failures
How Savers Can Benefit — Practical MoneyMagpie Tips
This is the first increase to the deposit protection limit since 2017. The move signals that regulators are taking savers’ protection more seriously in the face of inflation and the changing banking landscape. It also aligns the UK more closely with standards in other jurisdictions, helping maintain consumer trust in the system.
For the sector, banks, building societies and credit unions will need to update their communications and documentation accordingly — for example, firms must update FSCS-disclosure materials by end of May 2026.
From a MoneyMagpie reader’s perspective, the key takeaway is: your savings are now better protected — but you still need to act with awareness. A higher cap is no substitute for a good savings strategy, being aware of where you hold your money, and what protections apply.
1. Spread savings strategically
Use different banking licences to maximise coverage.
2. Don’t let large sums sit idle
High-interest accounts, fixed-term ISAs or bonds may offer better returns.
3. Re-evaluate emergency funds
Households commonly hold £5k–£20k in cash buffers — but if yours is bigger, the new limit gives more security.
4. Plan around big life events
If selling a home, receiving a redundancy payout or inheritance, make sure you benefit fully from the temporary high balance rules.
5. Don’t assume your bank “looks safe”
FSCS protection applies equally across large and small institutions.
Focus on coverage — not brand size or reputation.
Does This Mean Banks Are At Risk?
No — this isn’t a warning sign.
Raising the limit is a preventative confidence measure, not a reaction to failing banks. It strengthens consumer protection and ensures the UK stays aligned with global regulatory standards.
Risks and caveats to note
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The protection limit, while higher, still has a ceiling — if you hold, say, £200,000 in one institution, and it fails, amounts above £120,000 could be at risk (unless spread across other authorised firms).
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Some “big brand” banks share a licence across sub-brands; just because two banks look different doesn’t guarantee they are separate authorised firms. Savers need to check.
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The limit applies to authorised deposit takers under the regulatory regime; not all financial products or non-deposit entities fall under FSCS deposit protection.
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While the increase is welcome, it doesn’t change the underlying risk of provider failure — the limit protects you if your bank goes bust; it does not guarantee returns or prevent losses from other risks.
Who Gains the Most From the Increase?
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Older savers with large cash pots
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Home-sellers temporarily holding large deposits
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People managing estates or inheritances
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Cautious investors who prefer cash savings
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Anyone using multiple savings apps or bonus-rate accounts
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How you can use this to your advantage
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If you hold more than £85,000 in a single institution and have been concerned about the cap, this change offers more comfort.
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But don’t take it as a reason to “park everything” in one account and ignore diversification — it remains wise to spread your savings across different authorised firms (with separate licences) if you are holding significant sums.
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Use this moment as a prompt to review your savings structure: check how many separate “authorised firms” your accounts cover (especially if you use brands under a group umbrella), check the T&Cs, and keep an eye on any changes firms make to their licences.
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If you are expecting a large “life-event” payout—for example from a house sale, insurance or inheritance—this higher temporary high balance protection gives more headroom, but you’ll still want to act with timing and structure in mind (e.g., qualify for the six-month window).
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Quick Summary: What MoneyMagpie Readers Should Do
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✔ The FSCS limit increases to £120,000 on 1 December 2025
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✔ Temporary high balance protection rises to £1.4m
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✔ Check whether your banks share a licence
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✔ Spread savings if you hold large amounts
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✔ Prepare for six-month protection if receiving a large payment
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✔ Take this opportunity to review your savings strategy
Your money is now better protected than it has been in over a decade — but the smartest savers will still structure accounts carefully.
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