In uncertain economic times, even banks and building societies are not immune to financial ruin. If you have large cash deposits, this can be devastating.
The UK’s Financial Services Compensation Scheme (FSCS) protects consumers as well as some companies and charities if disaster strikes. Set up by the government, the scheme provides compensation when a UK-regulated financial firm goes bust.
Until recently, you could only claim back the first £85,000 of your money. On 1 December 2025, the compensation cap increases to £120,000 per person per institution, making saving easier and safer. This is the first increase since 2017 and reflects the impact of inflation on savings balances. The change will happen automatically and be applied to all eligible accounts.
How the FSCS allowances work
Not sure if your accounts are covered by the scheme? Now is a good time to check that your savings are fully protected. Fixed bonds, cash ISAs and instant access savers are just some of the accounts that are eligible for compensation.
If you’ve got a joint account, the protection increases to £240,000 as the FSCS allowance is per individual. However multiple deposits with different brands owned by the same institution will only be covered up to a total of £120,000.
If you have more cash than normal due to a life event, such as an inheritance or a house sale, then it might still be covered by the FSCS. As of 1 December, temporary high balances of up to £1.4 million can be protected for up to six months instead of the previous £1 million.
Maximise your cash holdings
The higher compensation allowance opens up new opportunities for savers, especially when it comes to structured deposits. Similar to fixed rate bonds, structured deposits are linked to stock market performance, which means they can potentially offer greater returns without putting your capital at risk.
S4 Financial can help you assess the suitability of structured deposits and assist with reviewing your cash diversification strategy to ensure FSCS protection caps are not exceeded.
Life priorities and stages as well as market dynamics will be key to your cash management and investment decisions. S4 Financial provides personalised advice to help clients minimise their risks and maximise their returns. Get in touch to learn how to cash in on the higher FSCS thresholds.
The information in this article is for general guidance only and does not constitute personal financial advice. All investments and savings products carry risks. The value of investments can go down as well as up, and you may get back less than you invest. FSCS protection depends on the specific product and whether the provider is authorised and regulated by the Financial Conduct Authority (FCA). Compensation limits and eligibility criteria may change. Consider seeking regulated independent financial advice if you are unsure about the suitability of any product for your circumstances.