Increase Bank Account Protection to £110,000 Proposal

Yesterday, the Prudential Regulation Authority (PRA), a division of the Bank of England, issued a release proposing to increase the protection limit of the Financial Services Compensation Scheme (FSCS) from £85,000 to £110,000 for cash deposits, credit unions, bank and building society accounts should your ‘bank’ fail and go into liquidation.

The FSCS compensation limits for deposits has been held at £85,000 since 2017.  This is the limit of protection per person per banking licence.  Under the new proposals, for each banking licence, savers will be protected up to £110,000 (sole account) and £220,000 (joint named accounts).  The key point in this is that protection is per banking licence, and you need to check to ensure that you do not use different banking brands that are under the same banking licence e.g., Yorkshire Building Society has 3 brands, Royal Bank of Scotland (RBS) has 7 brands and Lloyds Bank has 8 brands.

See:  Cash Protection

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.”

Compensation Levels Vary

You should also be aware that investment protection, insurance protection, funeral plan protection, debt management, mortgage and pension protection levels are all different with the FSCS.

See all Compensation Videos

The proposal comes as part of a wide-ranging consultation on deposit protection provided by the FSCS.  Other proposals include:

• An increase in the limit applicable to certain temporary high balance claims – used for qualifying life events like buying or selling a house and payouts from insurance policies – from £1 million to £1.4 million, with effect from 1 December 2025.
• Introducing rules needed to facilitate the Bank Resolution (Recapitalisation) Bill, which proposes a new resolution tool enabling industry funds provided via the FSCS to be used to recapitalise a failing firm to support its sale or transfer to a bridge bank.  The PRA proposes to make these rules once the relevant provisions in the Banking Resolution (Recapitalisation) Bill have been enacted and brought into force.

Comment

The proposed increase allows for inflation since 2017 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.