The UK has increased the level of protection offered to savers in banks, building societies and credit unions to £120,000, up from £85,000, in a move intended to bolster confidence in the

financial system.

The higher limit, which took effect on Monday, covers deposits held with UK-authorised institutions and is designed to shield customers should their provider fail. It is the first adjustment to the threshold since 2017.

The Financial Services Compensation Scheme (FSCS) said the change has been applied automatically and customers do not need to take any action. Under the scheme, eligible depositors are guaranteed compensation of up to £120,000 within seven days of a firm’s collapse.

Sam Woods, deputy governor for Prudential Regulation at the Bank of England and chief executive of the Prudential Regulation Authority (PRA), said the decision would help maintain trust in the sector. “This change will help maintain the public’s confidence in the safety of their money,” he said. “It means that depositors are protected up to £120,000 should their bank, building society or credit union fail.”

The new ceiling is higher than the PRA’s earlier proposed rise to £110,000 and follows consultations with industry stakeholders. Regulators said the increase reflects the impact of inflation on household savings.

Authorities also reminded consumers that the £120,000 limit applies per banking group, not per brand. Deposits held across different brands operating under the same banking licence are aggregated for compensation purposes.

FSCS chief executive Martyn Beauchamp said the enhanced protection “ensures that consumers can feel confident their money is safe, from the very first penny up to £120,000,” adding that trust in financial services is essential for economic stability.

Rocio Concha, director of policy and advocacy at consumer group Which?, described the increase as a “sensible decision” that should help reinforce consumer confidence amid efforts to support economic growth.