Is Your Money Safe in the Bank? A Straightforward Look at the FSCS and Inflation

By Kane White, CEO and Founder of Britannia Bullion and Montford Group

Most people believe their money is entirely safe in the bank, and for the most part, it is. But have you ever stopped to ask: What if something went wrong? What protects our savings?

I am always asking myself, what would happen in the worse case event, after all, prevention is better than the cure... right?

In the UK, we have the Financial Services Compensation Scheme, or FSCS for short. It protects up to £85,000 per person, per bank or building society, if a firm goes bust or collapses.

Now, let’s dig into the details.

How Does the FSCS Work?

The FSCS is like an emergency pot of money set aside to cover customer losses if a bank fails. It’s funded by financial companies/Banks/Building Society's themselves, they all chip in every year.

That contribution is called the “industry levy.” Think of it like a membership fee all banks and financial firms must pay to keep the pot topped up. 'Have to keep the pot topped up...'

For 2025–26, the FSCS has said it expects to pay out £332 million in total compensation, (wow). That money will come from a £356 million levy collected from banks, insurers and other finance firms.

Source: FSCS official announcement
https://www.fscs.org.uk/media/press/2025/may/reduced-levy-of-356m-for-2025-26/

Let’s Use a Real Example: Barclays Bank

Barclays has around 48 million customers. Now, hypothetically imagine that just 10% of them, 4.8 million people, have more than £85,000 saved with the bank.

If Barclays were ever to go under (and to be clear, this is just a thought experiment), the FSCS would be expected to pay up to the £85,000 cap for each of those 4.8 million customers.

That’s:

4,800,000 customers × £85,000 = £408 billion

That’s over 1,100 times more than the FSCS currently holds for the year ahead. It shows that while the FSCS is strong enough to handle a small or isolated failure, a major event affecting one of the big banks would put it under serious strain, let alone more than one!

What About Inflation?

Right now, many banks are offering savings rates around circa 4% interest. Sounds decent, right? considering there is no risk, well thats what we thought, until now.

But here’s the problem: things are getting more expensive, faster than that.

The official inflation rate (CPI) was 3.5% in the 12 months to April 2025, but that’s just an average. What you actually spend money on might have gone up more.

For example:

• Water and sewerage bills rose 26.1%

• Council tax and social rents went up 6.6%

• Fuels and electricity have seen jumps over 15% in some areas

Source: Office for National Statistics (ONS)
https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/april2025

So even if your savings earn 4%, your spending power, what that money can actually buy, may be shrinking. Quietly. Month after month.

So, What Can We Take From This?

We’re not saying your money isn’t safe. Most UK banks are well-capitalised and closely regulated. But it's important to understand how protection works, what the limits are, and what inflation does in the background.

This isn’t about panic. It’s about being aware of the system you’re trusting your money to. That way, you can make better decisions, whatever they may be.

As always, this blog is educational only. It is not financial advice. If you're making decisions about your savings, always speak with a qualified professional.

Preservation is better than the cure.

FACT- 2000-2025 Gold has recorded an increase of over 1200% increase, and it is important to note, if you had invested into BLT (British Legal Tender) Gold coins, that 1200% profit, would be tax free.

Use the code:KW2025BB for a £50 discount on eligible products-only on phone orders.

Until next time,
Kane