The Prudential Regulation Authority (PRA) has today proposed to raise the deposit protection limit of the Financial Services Compensation Scheme (FSCS) from £85,000 to £110,000.
The deposit protection limit – which represents the maximum amount of money the FSCS typically protects should a depositor’s bank, building society or credit union become insolvent – has been set at £85,000 since 2017.
The proposed increase takes into account inflation since the limit was last changed, and is designed to give consumers confidence that their money is safe if their UK-authorised bank, building society or credit union fails.
If taken forward, the new limit would apply to firms that fail from 1 December 2025 but there are no current plans to extend the increase to investments and pensions.
The PRA proposal points out: "The FCA is responsible for FSCS protection in relation to certain regulated activities, including investment provision and distribution, home finance, debt management, funeral plan provision and insurance distribution.
"The FCA has no immediate plans to make similar changes to the compensation limits it is responsible for but will keep this under review while continuing to focus on preventing firms from failing without paying their redress liabilities."
Sam Woods, deputy governor for prudential regulation and CEO of the PRA 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.”
Martyn Beauchamp, CEO of the FSCS, said: “Depositor protection is what FSCS is best known for, as it covers the money held in our day-to-day current accounts and savings. Consumers tell us that the existence of FSCS protection is a key driver of their trust in financial services, and this trust is in turn a critical component of stability and growth. It’s important that FSCS’s limit is reviewed to ensure it stays appropriate and relevant.”
The FSCS, established in 2001, has paid compensation of £10.1m to depositors in the past three full financial years, primarily in relation to small credit union failures. Since it was established, the FSCS has paid over £20bn, primarily in relation to deposit failures during the 2008 financial crisis.
The consultation on the PRA proposals opens today. Responses in relation to the proposals in connection with the limit of protection available from the FSCS are requested by 30 June.
The PRA expects to confirm the outcome of its consultation in November, with any change to the deposit protection limit requiring approval from HM Treasury.
