Boost for savers as bank protection limit rises to £120,000

More of your savings will be secured, but it’s important you understand how the limit is applied so you don’t unwittingly leave your funds at risk.

Savers will enjoy greater protection for their funds from next month.

As of December 1, the amount of money that will be protected if your bank goes under will rise dramatically from £85,000 to £120,000.

The change to the protection limit, the first seen since 2017, was confirmed today by the Prudential Regulation Authority (PRA) earlier today (November 18).

Sam Woods, CEO of the PRA, said the change would help maintain the public’s confidence in the safety of their money. “Public confidence supports the strength of our financial system,” he added.

The move is obviously welcome news, but it’s important to understand how the protection limit is applied to avoid unwittingly leaving your funds at risk should your bank go bust.

So, let’s look at the limit in more detail

How the savings protection limit works

All UK-regulated savings institutions are covered by the savings limit, so that includes banks, building societies and credit unions.

It’s currently set at £85,000, but, as mentioned, that’ll rise to £120,000 next month.

This limit is applied per person, so a joint account would enjoy double that level of protection.

Crucially, the limit is also applied per institution.

This matters because seemingly unrelated banks and societies can fall under the same umbrella, meaning only one savings limit will apply across those brands.

For example, you might not be aware that Ulster Bank and NatWest fall under the same group, as do First Direct and HSBC.

Imagine the following scenario: you have saved over many years and now have one pot of £70,000 saved with First Direct and £70,000 saved with HSBC.

You might assume all your money is safe because the first £120,000 (from December) in each account is protected.

But because these two brands fall under the same licence, it actually means you're only covered for £120,000 across both, meaning £20,000 would be lost if there was a catastrophic failure at these banks and they went under. 

We recognise not many savers have access to such large sums of money, but for those who do, it’s important you take time to ensure your savings are spread not just across different brands, but different banking licences.

Take a look at our roundup of which brands fall under the same umbrella to learn more.

Temporary higher limit is also increasing

We’ll finish by highlighting another change being made to the savings limit.

There are various times in your life when you might hold huge sums of money for a short time, perhaps because you’ve just sold your home or you’ve received a large insurance payout.

These sums may well dwarf the standard savings protection limit, so there is a temporary, higher limit in place to keep these funds safe,

At present it’s set at £1 million and lasts for six months.

This will rise to £1.4 million next month, with the six month limit unchanged.