UK bank and building society customer protection limit to rise to £120,000

The amount of a customer’s money protected if a UK bank or building society goes bust will rise to £120,000 next month, providing a boost to the nation’s savers.

The new deposit protection limit, a 41% rise from the current limit of £85,000, is higher than expected and takes effect on 1 December.

The original plan was that UK savers would have up to £110,000 of their deposits protected if their bank, building society or credit union went out of business. However, it appears this is one of the rare areas where consumers are benefiting from the fact that UK inflation – currently 3.8% – is higher than officials and the government would like it to be, at nearly double the 2% target.

Announcing the new rules, the Bank of England’s regulatory arm, the Prudential Regulation Authority, said the proposed new limit of £110,000 had been increased “in light of consultation feedback and to reflect the latest inflation data”.

It is the first increase in the limit for eight years and means that, from 1 December, if a UK-authorised bank, building society or credit union goes out of business, the official Financial Services Compensation Scheme (FSCS) will compensate eligible customers up to the new limit of £120,000, which is per person and per firm.

Customers will typically get their money back within seven days of a lender going out of business.

As expected, the amount of protection for “temporary high balances” – where someone can suddenly see a large amount land in their bank account because of a significant life event such as selling their house or receiving an inheritance or insurance policy payout – is also being increased, from £1m to £1.4m.

The FSCS protects temporary high balances for up to six months, and other eligible life events can include receiving a retirement, redundancy or personal injury payout. However, money received from selling a second home or a buy-to-let property is not covered by those rules – it has to be someone’s “main residence”.

The higher deposit guarantee limit may encourage some well-off consumers to stash more of their money in savings accounts – which could be viewed as contrary to what the government would like.

The new level will be introduced five days after the budget, when Rachel Reeves, the chancellor, could reduce the amount that people can put into cash Isa accounts.

For months there has been speculation that she may cut tax breaks on cash Isas in her budget on 26 November in order to encourage more people to put money into the stock market, and in particular British companies, as part of the government’s mission to boost economic growth.

Concerns about what might happen in the budget have been cited as one of the reasons why savers are piling billions of pounds into savings every month. The latest Bank of England data showed that in September alone, £5.8bn poured into easy access accounts, while an extra £2.4bn went into cash Isas.

That said, millions of people in the UK will never have to worry about having more in savings than is protected by the FSCS limit. In 2024, about 10% of UK adults had no cash savings whatsoever, while for the 90% who did, the median amount held was between £5,000 and £6,000, according to a report issued earlier this year by the Financial Conduct Authority. Another survey found that the average person in the UK has £16,067 in savings in 2025.

Sam Woods, the PRA chief executive, said the new maximum limit “will help maintain the public’s confidence in the safety of their money”.