PRA Proposes FSCS Compensation Limit Increase to £110,000
💷 PRA Proposes FSCS Compensation Limit Increase to £110,000
Published: 4 April 2025 | Author: Barnett & Co Accountants
The Prudential Regulation Authority (PRA) has announced plans to raise the deposit protection limit under the Financial Services Compensation Scheme (FSCS) from £85,000 to £110,000, marking a significant shift in the UK’s financial safeguards for savers and small businesses.
This proposed change, currently under consultation, is designed to account for inflation and strengthen public trust in the UK’s banking system. If approved, it would take effect from 1 December 2025, with a six-month transition period for banks and building societies to update disclosures.
📈 What is the FSCS Protection Limit?
The FSCS deposit protection limit is the maximum amount covered per person, per financial institution, in the event of a bank, building society or credit union failure. The current threshold of £85,000 has been in place since 2017.
Under the new proposals, the limit would rise to £110,000, offering more robust protection for personal and business savings.
“We want to support confidence in our banks, building societies and credit unions... so all that money is safe even if the firm fails.”
— Sam Woods, Deputy Governor & CEO, PRA
🏠 Temporary High Balances to Rise to £1.4 Million
In addition to the base protection, the PRA has also proposed an increase in the Temporary High Balance limit from £1 million to £1.4 million. These balances typically arise from life events such as:
The sale or purchase of a home
Divorce settlements
Insurance payouts
Inheritance distributions
Temporary high balances are protected for a limited period (usually up to six months), and the proposed uplift ensures coverage remains meaningful in today’s economic climate.
🔍 Why the Increase Now?
The proposed increase reflects:
Inflationary pressures since 2017
A desire to maintain depositor confidence
Trends in rising house prices and larger financial settlements
The critical importance of the FSCS in supporting financial stability
Since its inception in 2001, the FSCS has paid out over £20 billion, mainly during the 2008 financial crisis. In 2024 alone, £10.1 million was paid to depositors, mostly relating to credit union failures.
“Consumers tell us that FSCS protection is a key driver of their trust in financial services... It’s important that the limit is reviewed to stay relevant.”
— Martyn Beauchamp, CEO, FSCS
🧾 What Happens Next?
The consultation is open until 30 June 2025.
If confirmed, the new limits will apply to failures from 1 December 2025.
Firms will have until 31 May 2026 to update all disclosure documents.
💼 What This Means for You
At Barnett & Co Accountants, we see this as a positive development for both individuals and small businesses. The enhanced coverage provides peace of mind and reflects real-world financial realities.
For our clients:
Business bank accounts will enjoy higher protection.
Individuals with multiple savings pots or joint accounts will benefit more from the limit uplift.
Anyone with temporary large deposits (e.g. house sale proceeds) will enjoy significantly better protection.
If you’re unsure whether your funds are fully covered under FSCS, or if you’re managing large cash reserves, we recommend reviewing your banking arrangements.
📣 Need Advice?
If you'd like to know more about how the FSCS changes affect you or your business, get in touch with our team today. We can help you:
Structure your accounts to maximise FSCS protection
Manage large transactions with minimal risk
Navigate changes in UK financial regulation confidently
📞 Call us or 💬 Book a free consultation via our contact page.
🗓 Key Dates
Consultation closes: 30 June 2025
New limit effective from: 1 December 2025
Transitional period ends: 31 May 2026
