On 1 December 2025, the limit that the Financial Services Compensation Scheme (FSCS) will pay to clients in the event of a bank collapse increased from £85,000 to £120,000 per individual and per institution (but not per account – therefore, if you hold other client money in the same bank as your client account, the limit remains £120,000 in total).
The FSCS is required to pay deposit compensation for verified claims where the account holder is not absolutely entitled to the eligible deposit within three months of the failure of a deposit-taking institution.
Who is covered by the FSCS deposit protection scheme?
Eligible claimants who are included for cover under the FSCS deposit protection scheme include:
- individuals
- small and large companies (although some exclusions may apply to large companies)
- small local authorities (such as parish councils)
The FSCS provides up to £1.4 million protection limit for temporary high balances held with a bank, building society or credit union if the institution fails. Cover is related to specific life events and limited to natural persons only. More details on temporary high balance protection and the definition of specific life events can be viewed here – https://www.fscs.org.uk/making-a-claim/claims-process/temporary-high-balances/.
Firms should review their terms of business and ensure that they are providing the correct information to clients regarding the FSCS Compensation Scheme.
You can find out more by reviewing the Law Society’s Practice Note: ”Protection for client accounts”.
Is your Client Care Letter and Terms of Business up to date?
If your Firm’s client care letter and terms of business have not been recently reviewed, now would be an ideal opportunity to make use of RACO’s Client Care drafting service – please see our brochure here.
