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Have you ever wondered what would happen to your savings if your bank went under? It’s not something most of us think about – until a financial crisis hits. The good news is that the Financial Services Compensation Scheme (FSCS) is there to protect your money, and since 1 December 2025 the protection has increased.
The limit was £85,000 but is now £120,000 per person, per institution – but that doesn’t mean you can relax completely. Here’s what you need to know to make sure every penny is safe.
What’s on this page?
The FSCS is the UK’s financial safety net. Set up by the government in 2001, it protects consumers when financial firms fail. It covers funds held by institutions such as banks, building societies, credit unions, insurance providers, funeral plan providers and investment firms. It can also pay compensation to consumers in other scenarios, for example if a company has been negligent or has given unsuitable advice.
The FSCS is free to consumers. It’s funded by levies imposed on the authorised financial services firms it covers. The scheme proved especially useful in 2008 when the credit crunch and recession caused several banks, including Bradford & Bingley, Icesave and Heritable Bank, to go bust.
Icesave in particular had offered headline-grabbing interest rates on its savings accounts, attracting huge numbers of savers. Although the brand was run by Icelandic bank Landsbanki, it was authorised to operate in the UK and was covered by the FSCS.
More than £4bn was paid back to Icesave account holders alone, representing about a fifth of the £20bn the FSCS paid out in total to over 4 million customers during the financial crisis. Fortunately, subsequent years haven’t required such big compensation claims.
In 2024/25, the FSCS paid out £327 million to over 32,600 customers. This isn’t because any banks went bust, although it does include compensation for customers of three credit unions that failed that year, as well as compensation for customers of insurance companies which failed in previous years.
Some of the compensation related to self-invested personal pension (SIPP) SIPP operator failures. There was also compensation for people who had received unsuitable mortgage, investment, pension or SIPP advice, as well as for mis-sold insurance policies.
The move is designed to reflect changes in inflation and rising savings balances, helping to maintain the real value of the protection. An increased limit will particularly benefit the over-50s as many savers in this age group keep a sizeable portion of their retirement pot in cash.
Sam Newton, director at Gravitate Accounting, says: “The raising of the FSCS limit makes a lot of sense. The value of this limit has been eroded by inflation and rising interest rates have encouraged more long-term saving.
“Over 50s are likely to have large and complex balances from pensions, inheritance, or downsizing property. Without this increase, they must split funds across banks to stay protected, meaning unwelcome admin and complexity.”
The FSCS only covers financial services firms that have been authorised by the Financial Conduct Authority (FCA) or the Prudential Regulation Authority (PRA) to do business in the UK.
To ensure your money is protected, always check that any firm you deal with is authorised by the FCA or PRA before depositing funds or investing. Look for their authorisation number, often called a ‘firm reference number’ (FRN), usually found on their website or documents.
You can find out if your money is covered by using the FSCS protection checker on its website.
The £120,000 limit applies to each person, per authorised firm (specifically the firm that has the banking licence for deposits).
So for joint accounts the limit applies to each account holder. The scheme will assume funds are held in equal proportions. This means if you have a joint account with your spouse, you’ll be covered up to £240,000 between you.
The limit is per banking licence, not per account – so if you hold more than £120,000 in cash savings, it’s important to spread your money across different banks that have different licences.
For example, Halifax and Bank of Scotland are both owned by Lloyds Banking Group and share a banking licence – so they are counted as one institution when it comes to the FSCS.
The same goes for HSBC and First Direct. In contrast, Royal Bank of Scotland and NatWest are both owned by the NatWest Group, but each bank has its own banking licence, each offering the £120,000 protection limit.
Ulster Bank deposits (in Great Britain) are covered under NatWest's licence, meaning your total protected amount across NatWest and Ulster Bank combined is £120,000.
The FSCS protection checker also allows you to put in details of all of your accounts, so you can see how much of your cash is protected. Once you’ve entered information about your first account, use the ‘+ add account’ button on the results page to add more.The checker will show youif any of your accounts have a shared licence, and whether the total balances are over the compensation limit.
Various studies show that average savings balances tend to increase with age. For example, according to NatWest, 29% of those aged 55+ have more than £10,000 in an emergency fund – compared to just 18% on average.
According to the Hargreaves Lansdown Savings & Resilience Barometer, the average working UK household holds £8,076 in savings. When the household is headed by someone aged 50 to 55, this figure rises to £11,250. When headed by someone 55 to 59 it’s £12,700, and at 60-plus, it’s £12,278.
Sarah Coles, personal finance expert at Hargreaves Lansdown, says: “More than 99% of people are covered by the £120,000 limit, but older people may have more cash than this for a number of reasons. They may, for example, have lump sums after downsizing, taking tax-free cash, or when selling assets in order to prepare for paying for care. They should also keep one to three years’ worth of essential spending in an emergency fund, which for some people will bust the limit.”
There are some circumstances where you may be entitled to additional FSCS protection if your account has a temporary high balance because of a ‘qualifying life event’.
The FSCS can now protect temporary high balances of up to £1.4 million in your bank, building society or credit union account for six months. This will give you time to spread the money between institutions, or spend some of it, without losing sleep over what would happen if your bank went under. This limit used to be £1m but was also increased on 1 December 2025.
The qualifying events can include:
The FSCS claims process varies depending on what type of firm has failed. If your bank, building society or credit union fails, the process is designed to be automatic. The FSCS aims to pay compensation, usually directly into an alternative account, within seven working days for the majority of cases, meaning you typically don't need to actively submit a claim for deposits.
If an insurance company fails, the FSCS will aim to transfer policies to another insurer. If that’s not possible, it will arrange the return of the remaining premiums. For all other claims, such as against investment companies or funeral plan providers, you’ll need to use the FSCS online claims service.
The FSCS is a safety net that gives UK savers – particularly those nearing or in retirement who might hold large cash balances – peace of mind. But even though the limit has increased to £120,000, it’s still important to check where your money is held, look up the banking licences, and ensure your hard-earned nest egg remains fully protected under the FSCS rules.
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