Find out about how FCSC protection works
What is the Financial Services Compensation Scheme (FSCS)?
The Financial Services Compensation Scheme (FSCS) offers protection and compensation when financial services firms fail or are unable to meet their financial obligations, serving as a safety net for consumers in the United Kingdom. Established in 2001, this statutory scheme is an essential part of the UK’s financial services regulatory framework.
The FSCS covers various financial products and services, including bank deposits, investment business, home finance (such as mortgage advice), and insurance policies. The aim is to maintain confidence in the financial system, ensuring that individuals and small businesses have a fallback if their financial services provider goes out of business.
The FSCS is funded by levies imposed on firms authorised by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA). These contributions ensure that the scheme can provide compensation without the need for taxpayer funding.
What Protection Does the Financial Services Compensation Scheme Provide?
The Financial Services Compensation Scheme (FSCS) offers protection in four main areas:
- Deposits: It safeguards money held in banks, building societies, and credit unions. If a financial institution fails, the FSCS can compensate up to £85,000 per person, per institution, and £170,000 for joint accounts.
- Investments: If a firm is unable to return investments due to its failure, the scheme covers up to £85,000 per person, per firm. This includes losses related to the advice received, investment management, or misrepresentation.
- Insurance: The FSCS protects policies for life and general insurance, ensuring 100% coverage of the claim with no upper limit for compulsory insurance and long-term insurance policies. For other types, such as home or travel insurance, it similarly covers 100% of the claim with no upper limit.
- Home Finance: It offers compensation up to £85,000 per person, per firm, for losses arising from bad mortgage advice, improper mortgage arranging, or if the lender fails.
How the FSCS Protects Banks and Building Societies
The Financial Services Compensation Scheme (FSCS) ensures that if a UK-authorised bank, building society, or credit union fails and can’t return your money, you’re automatically compensated.
This safety net covers up to £85,000 for individual accounts and £170,000 for joint accounts. It also offers special protection for certain temporary high balances, protecting up to £1 million for six months after the money is deposited.
It’s important to understand that the amount of compensation you’re entitled to can be affected by where you hold your money. If you have accounts with institutions that are part of the same banking group and share a banking licence, the FSCS treats them as one bank. This means the compensation limit applies to the total amount held across all these accounts, not individually.
For the FSCS’s compensation limit to apply individually, your accounts must be with different banks that don’t share a licence. The Financial Services Register is a helpful resource to check which banks share a licence.
The FSCS aims to pay compensation within seven working days of a bank or building society’s failure. While most cases are straightforward, more complex situations, such as claims for temporary high balances, may take longer, and you’ll need to contact the FSCS to apply.
What If I Have More Than One Account With the Same Bank or Building Society?
If you have more than one account with the same bank or building society, the Financial Services Compensation Scheme (FSCS) treats all those accounts as if they belong to one single bank for the purposes of compensation. This means the total compensation you’re eligible for across all your accounts is capped at the scheme’s limit of £85,000 per person, per institution. For joint accounts, this limit is £170,000.
This approach is based on the principle that the compensation limit applies per banking licence, not per account. Therefore, if you hold funds in multiple accounts with a single institution, or with institutions that are part of the same banking group and share a banking licence, your combined deposits are considered together against the £85,000 protection limit.
To maximise your protection under the FSCS, you may consider spreading your savings across different financial institutions that hold separate banking licences. This strategy can ensure that more of your money is protected, as each institution’s deposits would be covered up to the £85,000 limit independently.
How Can I Check a Bank’s FCA Registration?
To check a bank’s registration with the Financial Conduct Authority (FCA), you can use the Financial Services Register here.
Use the search bar to enter the name of the bank you wish to check. You can also search by the bank’s FCA registration number if you know it.
How Do I Make a Claim with the FSCS?
Making a claim with the Financial Services Compensation Scheme (FSCS) is a straightforward process designed to help you get compensation if an authorised financial services firm fails. Here’s how to initiate and navigate the claims process:
- Collect all relevant information and documents related to your claim. This might include account statements, policy documents, and correspondence with the firm.
- Start Your Claim Online: Visit the FSCS website and look for the “Start your claim” section. The online process will guide you through submitting your claim.
- Provide Details: You’ll need to provide personal details and upload any supporting documents.
- Submit Your Claim: Once you’ve filled in all the required information and attached your documents, submit your claim through the online portal.
- FSCS Review: After submission, the FSCS will review your claim. They may contact you for additional information or clarification if needed.
- Decision and Compensation: The FSCS aims to make a decision on claims within a specific timeframe, usually within a few months, depending on the complexity of the claim. If your claim is approved, the FSCS will arrange for compensation to be paid to you.
For those unable to access the online claims service, the FSCS also provides assistance via phone or post, ensuring everyone can submit their claim. If your situation is complex or if you have high-value or temporary high balance claims, the process may take longer, and specific forms might be required.