1. Preheat the oven to 375°F (190°C).

2. Cook the bacon in a large skillet over medium heat until crispy. Remove the bacon from the skillet and set aside.

3. In the same skillet, add the diced capsicum and cook until softened.

4. In a separate saucepan, melt butter over medium heat. Stir in flour until smooth. Gradually whisk in milk, then bring to a boil. Cook and stir for 2 minutes or until thickened.

5. Stir in cooked bacon, diced potatoes, and cooked capsicum into the saucepan. Season with salt and pepper to taste.

6. Transfer the mixture into a greased baking dish.

7. Bake for 25-30 minutes or until the potatoes are tender and the top is golden brown.

8. Remove from the oven and let it cool for a few minutes before serving.

9. Serve hot and enjoy!