Shoppers and savers are heaving a sigh of relief as the Bank of England hikes the UK deposit guarantee to £120,000, up from £85,000 , a bigger boost than first proposed and timed to shield people against rising prices and pockets of bank stress.

Essential Takeaways

  • Higher protection: The Financial Services Compensation Scheme (FSCS) limit rises to £120,000 per person from the start of December, covering more savings against bank failure.
  • Inflation‑adjusted: The increase was lifted from a proposed £110,000 to £120,000 to reflect persistent inflation and protect real savings value.
  • Temporary top‑up rises: Short‑term protection for large, recent inflows (inheritance, house sale) increases from £1m to £1.4m for six months, giving extra breathing room.
  • Minimal bank cost: The BoE estimates extra charges to banks will be under 0.1% of annual net income, plus about £44m of one‑off administrative costs.
  • Practical note: Most retail customers already hold less than the old limit, but higher balances and multi‑account strategies should be reviewed for clarity and safety.

Why this extra protection matters now and what it feels like for savers

Banking safety isn’t abstract; it’s the quiet comfort that your cash will still be there if a lender fails. The Bank of England’s decision to lift FSCS cover to £120,000 is meant to shore up that confidence, especially after high‑profile shocks such as Silicon Valley Bank’s collapse in 2023 rattled markets. For everyday savers it’s a tangible reduction in anxiety , your balance now stretches further under the safety net and smells less of emergency.

Regulators say the move is precautionary: inflation has eroded the real value of the old £85,000 cap, so increasing it keeps the guarantee meaningful. It’s a small administrative change with a big emotional payoff , you’re less likely to stay awake worrying about whether a chunky savings pot is safe.

How the change came about and the thinking behind the new figure

This isn’t a sudden whim. The Prudential Regulation Authority proposed raising the limit earlier in the year, initially to £110,000, as part of post‑SVB reforms to reassure depositors and tidy up UK depositor protection. Persistent consumer price inflation pushed the Bank to go further, landing at £120,000 and winning Treasury sign‑off.

The BoE has modelled costs and impacts. Banks will face higher contributions to the FSCS but only a tiny hit to their profits, according to regulators. There are also one‑off expenses , system updates and new disclosure materials , that account for the roughly £44m figure cited by the central bank.

What changes for people with large or recent windfalls

If you’ve sold a house, inherited money or received a large life insurance payout, the rules are kinder now. The short‑term top‑up protection that temporarily covers unusually large deposits for six months rises from £1m to £1.4m, giving you more time to redistribute funds safely without losing cover.

That matters if you’re moving money between banks or waiting for a mortgage completion. Still, this is a time‑limited buffer, not a substitute for planning. Think ahead about spreading cash across different banks or joint accounts if you regularly hold sums above the protected limit.

How to check whether your savings are fully protected

Start by totalling funds held with each authorised bank, building society or credit union. FSCS cover is per authorisation, not per account, so multiple accounts with the same bank are aggregated. Joint accounts are covered up to the limit per person, which can extend protection for partners.

If you bank with subsidiaries or branches of overseas groups, check whether they’re UK‑authorised; the FSCS covers UK‑authorised institutions only. For clarity, most online banking portals show whether a provider is covered, and firms must disclose FSCS protection in their literature.

What to do next , practical steps for peace of mind

If your balances exceed £120,000 with a single UK‑authorised institution, consider splitting funds across different authorised banks to keep each slice within the protected limit. Use joint accounts where appropriate and take advantage of the new temporary top‑up after big receipts.

Also, keep records of large inflows and dates; the six‑month enhanced protection requires proof of the qualifying event. Finally, don’t panic over small extra costs: the BoE expects the industry impact to be minor, but the consumer benefit is immediate and visible.

How this compares with previous changes and what might come next

The FSCS limit has been raised several times since launch in 2001, so this is part of a steady evolution , from the initial £31,700 to the last increase in 2017 and now a sizeable step to £120,000. The trend is simple: regulators adjust the real‑terms safety net as the economy and risks change.

Looking ahead, policymakers may review thresholds periodically, especially if inflation or market conditions shift. For now, the priority was clear: restore and maintain trust in the banking system, and make sure deposit protection keeps pace with living costs.

Ready to make your savings safer? Check current balances, verify each bank’s FSCS status, and explore today’s best options to keep your money comfortably within the new £120,000 guarantee.