The limit, currently £85,000, is the maximum a financial services customer can be compensated per institution in the case of a firm failing.

The increase to £120,000 is the first rise in the FSCS deposit limit since 2017.

FSCS chief executive Martyn Beauchamp said: “This rise ensures that consumers can feel confident their money is safe, from the very first penny up to £120,000.”

A PRA consultation on the issue initially proposed a limit of £110,000, and was raised by £10,000 to reflect the latest inflation figures and feedback from financial firms and experts.

The new limit will apply automatically from 1 December.

PRA chief executive Sam Woods said: “This change will help maintain the public’s confidence in the safety of their money.

“It means that depositors will be protected up to £120,000 should their bank, building society or credit union fail. Public confidence supports the strength of our financial system.”

The temporary high balance cover limit of £1million will also rise from 1 December, to £1.4million.

Moneyfacts finance expert Rachel Springall said: “This is incredibly important for those who, by no fault of their own, hold significant balances from major life events, such as receiving a significant inheritance or holding cash from a house sale.

“Those who have the cash stored up in a current account would be wise to shift it to a savings account, if they anticipate holding it for more than six months to earn a better return of interest. It is particularly important to split the funds with different UK-authorised banks, building societies or credit unions to keep within the FSCS deposit protection limit.”

The FSCS first consulted on raising the deposit limit in March 2025.