UK Raises FSCS Deposit Protection to £120,000 – But Investment Accounts Stay Capped at £85,000
UK regulators have confirmed a major update to depositor protection rules. From 1 December 2025, the Financial Services Compensation Scheme (FSCS) will increase cover on bank deposits from £85,000 to £120,000 per person, per authorised institution. However, the change does not extend to brokerage or investment accounts, which remain capped at £85,000 under separate FCA rules.
The change follows the Bank of England’s policy statement and reflects stronger inflation data, industry feedback, and the regulator’s mandate to keep depositor protection aligned with economic conditions (Reuters report).
Publish Date
26 Nov 2025
Reading Time
10 minutes
Category
Legal News
Jurisdiction
UK
What Changes on 1 December 2025
The Prudential Regulation Authority (PRA) confirmed that FSCS deposit protection will rise to £120,000 per eligible depositor at UK-authorised banks, building societies and credit unions. This represents the first increase since 2017 and exceeds the initial consultation proposal of £110,000.
The regulator also approved a rise in the cap for temporary high balances — sums linked to major life events such as property sales or inheritances. The limit will move from £1 million to £1.4 million, with protection available for six months. This aligns with the FSCS guidance on deposit-limit increases.
In addition, banks and building societies must update their FSCS disclosure materials, depositor-information sheets and branch signage by May 2026, as set out in the PRA’s new depositor-protection policy (Bank of England policy statement).
Why the Regulator Is Increasing the Limit
Under the Deposit Guarantee Scheme Regulations 2015, the PRA must review the FSCS limit at least every five years. The previous threshold remained unchanged for more than seven years due to stable inflation and post-pandemic conditions.
By 2025, updated inflation figures, increased household balances, and stakeholder feedback all pointed to the need for a modernised threshold.
Sam Woods, Deputy Governor for Prudential Regulation, emphasised that the new limit “will help maintain the public’s confidence in the safety of their money” when bank failures occur. The regulator also noted that rapid changes in deposit flows and competition among savings products strengthened the case for a higher cap.
What It Means for Savers, Investors and Brokers
For UK savers:
The new £120,000 protection is a direct enhancement. Customers holding cash across accounts with the same banking licence will benefit from a higher safety net, though deposits across multiple brands within a single group will still be aggregated for the FSCS limit.
The updated temporary-balance protection also offers greater security during property transactions, probate events or large insurance payouts.
For investors and brokerage clients:
FSCS coverage for investment accounts remains at £85,000 per person per firm. This protection applies only in specific scenarios such as insolvency, fraud or mismanagement by an authorised investment firm. It does not cover market losses or trading-related declines.
The PRA did not consult on raising investment-account coverage, and there is currently no indication that the FCA intends to align the investment limit with the new deposit cap.
For brokers and wealth managers:
The unchanged £85,000 investment threshold has practical implications:
- Firms must clearly explain the distinction between deposit protection and investment-account protection.
- Clients holding large cash balances within brokerage accounts may require guidance on whether those sums should sit in segregated client-money arrangements, bank-linked sweep products or diversified accounts.
- Wealth managers may need to update onboarding documentation, FAQs and suitability discussions to reflect the divergence in limits.
Compliance Actions for Firms and Platforms
| Firm Type | Required Actions | Deadline |
|---|---|---|
| Banks, building societies, credit unions | Update depositor-information sheets, FSCS signage, SCV systems, staff training | May 2026 |
| Investment firms / brokers | Revise client communications; clarify £85k investment-protection cap; update FAQs and risk disclosures | Ongoing |
| Groups with shared licences | Ensure clear communication on deposit aggregation across brands | Before Dec 2025 |
Our View – Strategic Implications
The increase in deposit protection to £120,000 strengthens consumer confidence, but it also creates a clearer differentiation between bank deposits and brokerage cash balances.
For brokers, this introduces both operational and strategic considerations:
- Some clients may shift higher cash reserves back to bank accounts for enhanced protection.
- Brokerage firms must proactively communicate the enduring £85k cap to avoid misperceptions.
- Platforms offering cash-management or cash-sweep models may need to reassess product design and disclosures.
- Firms servicing HNW clients should reinforce diversification strategies that account for both limits.
At Legasset, we assist financial institutions with regulatory-compliant client communications, FSCS-related disclosures, and cross-framework reviews for firms handling both deposits and investment services.
Schedule a consultation right now.
UK FSCS Deposit Protection – Key FAQs
What is the new FSCS deposit-protection limit?
From 1 December 2025, the new limit is £120,000 per eligible depositor per authorised institution.
Does this new limit apply to investment or brokerage accounts?
No. Investment accounts remain covered up to £85,000, and this protection only applies in cases such as firm insolvency, fraud or mismanagement.
What are “temporary high balances”, and what is the new limit?
Temporary high balances — such as funds from property transactions, inheritances or insurance payouts — will be protected up to £1.4 million for six months.
How is FSCS protection applied if a bank operates multiple brands?
Protection applies per banking licence, not per brand. Deposits across all brands under the same licence are combined when applying the £120,000 cap.
How does this affect clients holding both deposit and investment products?
Each product type is subject to its own limit. Deposits receive £120k protection, while investment accounts remain at £85k. Firms must ensure clients understand this split when managing cash holdings.
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