Protect Your Wealth: Why Diversifying Bank Deposits Matters

The £85,000 FSCS Compensation Scheme Limit and Why It Matters to You


Most investors are conscious of the importance of diversifying their portfolios to minimise risk.

But have you considered the same concept when it comes to your bank deposits? If you have more than £85,000 deposited in a single financial institution, it’s time to think about diversifying those funds for greater security. In this article, we’ll discuss the Financial Services Compensation Scheme (FSCS) and the importance of diversifying your bank deposits to protect your hard-earned money.

The £85,000 FSCS Compensation Scheme Limit:

The FSCS is a Government-backed deposit insurance program designed to protect your savings in the event a UK-regulated bank, building society, or credit union goes out of business.

It covers up to £85,000 per person, per financial institution. This limit applies to the total amount of money held in current accounts, savings accounts, and cash ISA accounts.

It is worth noting too that the limit applies to limited companies and partnerships too. If you have £85,000 of personal funds with a single institution and your limited company or partnership also has £85,000 with that same institution, both are covered in full by the FSCS.

However, if your business is unincorporated, you need to be doubly careful as your business is not considered a separate legal entity and you will only be covered up to £85,000 across your personal and business finances.

The Risks of Exceeding the FSCS Limit:

While the £85,000 limit may seem like a high threshold, it’s crucial to consider the potential risks of holding more than this amount with a single bank.

In the event that a financial institution fails, any funds exceeding the £85,000 limit would not be protected by the FSCS. This means that you could potentially lose a significant portion of your savings if you have not taken the necessary steps to safeguard your assets.

How to Diversify Your Bank Deposits:

To protect your savings and minimise risk, it’s essential to diversify your bank deposits across multiple financial institutions. Here are a few strategies to consider:

  1. Spread your funds across multiple banks: By holding your savings in accounts with more than one bank, you can ensure that your deposits remain below the £85,000 FSCS limit at each institution. This will provide you with the maximum level of protection in the event of a bank failure.
  2. Use joint accounts: If you have a spouse or partner, you can open joint accounts to increase your FSCS protection. Each account holder is covered up to £85,000, meaning that a joint account can protect up to £170,000 in total.
  3. Use multiple account types: Look for banks that offer different types of accounts, such as fixed-term deposits and notice accounts, that can provide additional interest and potential tax advantages while still being covered by the FSCS.
  4. Keep an eye on interest rates: As you diversify your bank deposits, pay attention to the interest rates offered by various institutions. Aim to maximise your returns without compromising the safety of your funds.


Diversifying your bank deposits is a crucial step in safeguarding your hard-earned savings. By spreading your funds across multiple financial institutions and remaining mindful of the £85,000 FSCS limit, you can minimise risk and ensure that your money is protected in the event of a bank failure.

Don’t wait until it’s too late – take action today to secure your financial future.

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