Are your savings safe if your bank fails

Headlines about bank collapses or credit unions going into administration can be unsettling. The idea of years of savings disappearing overnight is frightening, especially when you see footage of people queuing outside branches.

In this country there is a formal deposit protection scheme that steps in when banks, building societies or credit unions fail. Understanding how it works makes it easier to decide where to keep your cash and how to spread larger balances.

The basic idea of the deposit protection scheme

The Financial Services Compensation Scheme (FSCS) is a statutory scheme that protects customers when authorised financial firms go out of business.

The central bank explains that if a bank or insurer goes bust and cannot give you your money back, FSCS may pay compensation up to set limits. For deposits such as current accounts and savings accounts, FSCS protection applies to eligible banks, building societies and credit unions that are authorised and regulated.

The FSCS website confirms that for deposits:

• there is a standard compensation limit per person, per authorised firm
• most standard personal and small business accounts in banks, building societies and credit unions are covered, as long as the firm is properly authorised
• compensation is automatic in a failure, you are usually paid without having to make a claim.

How much of your savings is covered right now

At the time of writing, the standard protection limit for deposits is £85,000 per person per authorised bank, building society or credit union, with £170,000 cover on a typical joint account with two people.

This is set out clearly on FSCS and money guidance sites that describe how the current rules work:

• If you have £10,000 in a current account and £80,000 in a savings account with the same bank, that is £90,000 in total. Under current rules, FSCS would only guarantee £85,000 of that if the bank failed.
• If you and a partner have a joint account with £160,000 in it, the protection is £85,000 each, so the full £160,000 would normally be covered.

The key point is that the limit applies per person, per authorised firm, not per individual account. Having several accounts with the same bank does not multiply the limit.

One banking licence can cover several brands

A common source of confusion is that some banking groups run several brands under one banking licence. For FSCS purposes that group counts as a single firm.

FSCS guidance on banking licences explains that:

• protection is £85,000 per person per banking licence
• if two brands share a licence, your total across both is added together for the limit
• if brands sit under different licences, each has its own £85,000 limit.

Money guidance sites and FSCS both suggest checking who actually owns your bank and which licence it uses before you decide how to spread larger balances.

FSCS has an online bank and savings protection checker where you can enter the firm name and amount saved to see how much is covered.

What happens if your bank or credit union really fails

Real failures do happen, especially with smaller credit unions. Recent cases show how the system works in practice.

FSCS pages for failed credit unions explain that when a firm is declared in default:

• FSCS automatically calculates how much each customer is owed
• most eligible savers are paid within seven days, and more complex cases within around ten to fifteen days
• customers usually receive a letter or email explaining how they will be paid, often by electronic transfer.

You normally do not have to apply. The administrators pass customer data to FSCS, which then pays compensation up to the applicable limit.

The central bank and major banks reinforce this message in their own explainers: if an authorised bank fails, insured deposits are paid out quickly so that small savers are not left without access to money for long.

Extra protection for temporary high balances

Sometimes you may hold far more than £85,000 for a short period because of a major life event. Examples include:

• the proceeds of selling a home
• a large inheritance
• a compensation or divorce settlement
• a redundancy or retirement lump sum

FSCS has special rules for these temporary high balances. Official guidance says that, for qualifying events, balances can be protected up to £1 million for six months from the date the money was first deposited or became legally yours.

MoneyHelper gives similar examples and confirms that temporary high balance protection is time limited and only covers certain specific situations, not every large balance.

If you are expecting a large one off payment, it can be worth checking in advance whether it is likely to qualify and considering whether to spread it across more than one authorised institution.

App based accounts, prepaid cards and e money

Not every account in a finance app is a straightforward bank deposit.

FSCS and the financial regulator both stress that e money and payment institutions are regulated differently:

• money held as e money is usually safeguarded, not covered by FSCS
• if an e money firm fails, safeguarded funds should be kept separate and returned through the insolvency process
• however, there is no £85,000 deposit guarantee and money can be tied up for longer while the insolvency is sorted out

Some app based providers partner with a fully authorised bank for their savings products. In that case, deposits may be covered by FSCS via the partner bank, and the relevant firm and licence should be named in the product information.

FSCS and the regulator both advise customers to:

• check whether a provider is on the Financial Services Register
• check whether a product is described as a deposit with a bank, building society or credit union, or as e money
• read the provider's explanation of how money is protected before keeping large sums there.

If you cannot find your provider in the FSCS checker, that may mean the product is outside the deposit protection rules.

How proposals to raise the limit affect you

In 2025 the prudential regulator consulted on raising the standard deposit protection limit from £85,000 to £110,000, with a proposed increase in temporary high balance cover from £1 million to £1.4 million.

At the time of writing these changes are proposals, not yet in force. The consultation documents and news reports explain that:

• the aim is to adjust the limit for inflation since it was last set
• the goal is to keep confidence in the banking system by ensuring that typical households can keep all their ordinary savings fully covered
• implementation would follow formal approval and a set start date, likely around late 2025 at the earliest

Until a new limit officially takes effect, savers should plan on the current £85,000 standard limit and use temporary high balance rules and spreading strategies where needed.

It is sensible to check the latest information on the FSCS and regulator websites before making big decisions about very large balances.

Where government backed savings fit in

Alongside banks and building societies there is also National Savings & Investments (NS&I), a state owned savings provider.

NS&I and independent money guides highlight that:

• all money with NS&I is 100 percent guaranteed by HM Treasury, with no upper monetary cap
• this makes NS&I one of the safest places to hold very large cash balances, although interest rates are often not at the top of the market
• products include Premium Bonds, easy access accounts and fixed term bonds.

For smaller and medium sized sums, using several banks within FSCS limits can sometimes give better rates. For very large sums, NS&I can be a way to keep amounts beyond the FSCS limit fully backed by the state.

How to spread savings sensibly

Money guidance sites and banks themselves suggest a few practical steps if you have or may soon have more than the standard limit in cash:

1. List every account and provider
   Include current accounts, savings accounts, fixed term bonds and credit union accounts.

2. Identify which brands share a licence
   Use the FSCS checker and the Financial Services Register to see which firms really count as one institution for protection purposes.

3. Keep individual balances at or below the limit per institution where practical
   For example, instead of holding £200,000 with one bank, you might keep £80,000 with each of three different banks that have separate licences, and the remainder with NS&I.

4. Use temporary high balance cover for short term spikes
   If you are in the middle of a house sale or other life event, check whether temporary high balance protection applies and for how long, then plan to move excess amounts to a spread of institutions in good time.

5. Check whether any accounts are actually e money
   For large sums, you may prefer to keep the core emergency fund in fully FSCS protected deposits with banks or building societies, using e money only for smaller transactional balances.

Simple checks you can do today

If you want to be sure your savings are covered, you can:

• use the FSCS bank and savings checker to see how much of your money is protected across your existing accounts
• look up your providers on the Financial Services Register to confirm they are authorised for deposits
• read your bank or building society's own page on how savings are protected; most have a dedicated section that explains their membership of FSCS and which licence they use
• if you hold money with an app based provider, check whether it is truly a bank account or an e money wallet and how funds are safeguarded or insured

If you are still unsure, organisations such as MoneyHelper and Citizens Advice can talk you through what the rules mean for your own mix of accounts and help you decide whether to move any money.

Key points to remember

• There is a formal deposit protection scheme that covers most personal savings with authorised banks, building societies and credit unions up to a standard limit per person, per firm.
• At the time of writing the standard limit is £85,000, with £170,000 cover for a typical joint account, and extra cover for temporary high balances after certain life events.
• Some brands share a banking licence, so having several accounts with different names does not always mean extra protection.
• E money and some app based accounts are regulated differently and usually rely on safeguarding rather than FSCS compensation.
• Very large sums can be spread across several institutions and, where appropriate, government backed NS&I to keep all of it protected.
• Proposals to increase the standard limit are in consultation; until any change takes effect, plan on current limits and check official sources for updates.

Once you understand how the system works, bank failure headlines become less frightening. You can focus on choosing good quality accounts and interest rates, knowing that within the rules your core cash is designed to be protected even if the worst happens to your provider.