The Financial Services Compensation Scheme (FSCS) is the UK’s statutory compensation scheme for customers of UK authorised financial services firms. It has now been updated and, as of December 1, 2025, new limits have come into effect. 

Should a bank, building society or credit union fail, the FSCS protects eligible deposits up to the deposit protection limit of £120,000 per individual per institution, and £240,000 for joint accounts. 

FSCS provides a standard mark that offers consumers additional peace of mind that, should a firm where they have funds fail, their eligible deposits at that firm will be returned. 

The Financial Services Compensation Scheme (FSCS) was founded in 2001 as an independent body set up by Parliament under the Financial Services and Markets Act 2000 (FSMA). It consolidated eight previous schemes into one integrated national compensation system. 

Its introduction reflected the UK’s commitment to consumer protection in the financial sector. Initial compensation limits started at £31,700 for bank deposits, providing 90% coverage up to £35,000, later rising in 2017 to £85,000, where it has remained until December 2025. 

The importance of FSCS was demonstrated during the 2008 financial crisis, as it paid out billions in compensation and secured customer deposits at failed institutions like Bradford & Bingley, by taking loans from the Bank of England. 

In 2024/25, FSCS paid out £327m in compensation to 32,634 customers of failed firms. Since its inception, it has compensated more than 6.5 million people, paying out over £26.5 billion, across cases ranging from bank failures to unsuitable investment schemes. 

At its core, the FSCS protects consumers and businesses if their UK-authorised financial institution collapses, including banks, building societies, credit unions, insurers, and some investment and pension providers. 

• Scope: The scheme covers deposits, insurance policies (with varying limits for different products), pensions, investments, and mortgage advice. Some elements, like compulsory motor insurance, are covered in full; general insurance claims typically have up to 90% coverage.
• Coverage limits: FSCS currently covers up to £120,000 per individual per institution for eligible deposits (from 1 December 2025). For joint accounts, the limit is doubled. Temporary high balances, for example, following a house sale or inheritance, can receive protection up to £1.4 million for six months. Eligible business entities also benefit from FSCS protection, with limits similar to those for individuals, but applied on a per-company and per-institution basis.
• Deposit compensation: If an authorised firm fails, the FSCS automatically assesses eligibility and aims to pay compensation within 7 days for deposit accounts.
• Industry funding: The scheme is funded via levies paid by regulated financial firms. FSCS independently administers these funds and seeks to recover costs from failed businesses when possible. 

In November 2025, the Prudential Regulatory Authority (PRA) published its final policy on depositor protection following its consultation (CP4/25). The limit is to be increased from £85,000 to £120,000, effective 1 December 2025. 

The new deposit protection limits take effect on 1 December 2025 for firm failures occurring on or after that date. Firms are required to update their single customer view (SCV) systems, which provide information about eligible deposits to enable the FSCS to quickly compensate depositors in the event of a firm’s failure to reflect the new limit from that date. 

Deposit takers then have up to six months to make changes to their disclosure materials, which must be completed by 31 May 2026. 

The changes aim to strengthen consumer confidence and align protection limits with inflation and market conditions. The PRA outlined its reasoning for the new amount in its updated policy, stating: 

“The PRA has considered the appropriate figure for the updated limit taking into account the feedback received and that the CPI used in the inflation calculation has continued to increase since the proposal in the consultation was agreed. As a result, the PRA has decided to increase the deposit protection limit to £120,000. Based on the September 2025 CPI (the latest available monthly figure), £85,000 in January 2017 has increased to £116,770 in real terms. This points to a revised limit of £120,000 if rounded to the nearest £10,000.” 

At ClearBank for our Embedded Banking partners, we use a direct deposit model with individual named bank accounts where we hold funds at the Bank of England. We believe this model is optimal for several reasons: 

• A high quality, single customer view: ClearBank, in collaboration with our Embedded Banking partners, invest time and resource both in terms of teams and automation tools, to ensure the data quality stays extremely high.
• Deposit visibility for clients: a real bank account offers our clients more transparency into deposit movements, which helps them to model their customers’ underlying behaviours. 
• Balance transparency: we can see, in real-time, via an API our clients and their customers’ balances, even though we currently report them daily. That’s important because, in the event of a failure, we must turn that customer file round to the FSCS within 24 hours.
• Supporting improved customer outcomes: eligible deposits are paid out within seven days, rather than up to three months in the event of a failure.
• Client operational efficiencies: ClearBank manages the ledger, and the balances that feed into the FSCS file. This reduces administration for clients and enables them to focus on serving their customers and enhancing the customer experience rather than underlying process management and oversight. This ultimately, lowers the cost to serve their clients and data shows ClearBank delivers a 10% reduction in customer queries. 

Put simply, ClearBank clients can now offer FSCS protection up to £120,000 for individuals. This new limit is live and available to all our embedded banking clients, meaning their customers can deposit money more confidently knowing their deposits are, subject to eligibility, protected up to the new amount. There’s also the peace of mind that all GBP funds are held on behalf of customers at the Bank of England. 

Whether it’s an SME using Capital on Tap or Tide, a consumer saving with Chip, Coinbase, Raisin, Revolut or Wealthify, or payroll savings through PayCaptain, ClearBank is supporting a diverse set of firms to help their customers do more with their money.