What is the Financial Services Compensation Scheme (FSCS)?
The Financial Services Compensation Scheme (FSCS) protects customers from losing some of their cash if authorised financial services firms go bust.
It protects up to £85,000 of savings per individual, per financial institution (not just per bank), and also covers mortgages, insurance and investments.
In some circumstances, you could be covered for more than £85,000.
There's a measure to protect temporary high balances (THBs) - where you have money resulting from things like house sales, redundancy pay or inheritances - when you'll be covered for some types of funds up to £1m for a limited amount of time.
Originally you were only covered for up to six months, but this is being increased to up to 12 months from 6 August 2020 due to the impact of COVID-19, where it's felt that those with temporary high balances may need cover for a longer period.
This extension will apply to those with new and existing temporary high balances, meaning cover for existing temporary high balances will be extended to 12 months from its start date.
So money deposited into a UK bank, building society or credit union in February 2020, with the six-month THB coverage due to end in August 2020, will now be protected until February 2021. Similarly, if a qualifying THB is deposited in September 2020, coverage would run until September 2021, as opposed to March 2021.
From 1 February 2021, the temporary high balances time limit will revert back to six months.
This guide explains everything you need to know about the FSCS, how to make a claim, and comes with a handy tool to show how much protection you have with your bank.
Am I eligible for the FSCS?
You can only claim the FSCS compensation in certain circumstances, and certain criteria must be met.
The rules have been set by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA).
The criteria are as follows:
- the financial services firm must have failed and be unable to return your money itself - ie it is 'in default'
- the FCA or PRA must have authorised the firm when you used it
- you must have actually lost money
- you're claiming for personal money you've lost - although some businesses and charities may be able to claim in some circumstances.
How much does the FSCS cover me for?
The FSCS covers set amounts for certain financial products - here, we detail the maximum amount you can claim for; you'll only receive compensation for the money you've lost, rather than the maximum amount.
- banks and building societies: £85,000 per person, per financial institution
- credit unions: £85,000 per person, per firm
- debt management: £85,000 per person, per firm, up from £50,000
- home finance intermediation: £85,000 per person, per financial institution, up from £50,000
- general insurance: 90-100% depending on the circumstances
- life and pensions intermediation: £85,000 per person, per firm, up from £50,000
- long-term care insurance: 100% with no upper limit (if the firm failed after 3 July 2015), up from £50,000
- investment provision: £85,000 per person, per firm, up from £50,000
- investment intermediation: £85,000 per person, per firm, up from £50,000
- payment protection insurance: 90% of total claim (if the firm failed after 1 Jan 2010).
How does the FSCS work for savings and bank accounts?
An important caveat about the FSCS is that it only applies to funds saved within each financial institution with a banking 'authorisation' - not each bank account, or even each bank.
So, if you’ve saved more than £85,000 with two banks that are owned by the same institution with just one authorisation, you're only covered for £85,000 in total.
To make sure your cash is covered, there are four essential steps you should take:
1. Find out who owns your bank
The past few years have seen Lloyds take over HBOS, The Co-operative Bank merge with Britannia, and Santander buy Abbey, Bradford & Bingley and Alliance & Leicester, so you should check to see which financial institution your money is saved with.
2. Stay within the £85,000 FSCS limit
If you have more than £85,000 to save, be sure to split it up between more than one banking institution to ensure it’s all covered.
3. Consider a joint account
If you and your partner have saved a significant amount of money and you don’t like the idea of spreading it around multiple banks, consider opening up a joint savings account.
The FSCS covers £85,000 of savings per individual, per financial institution – so by placing your savings in a joint bank account along with your partner, you're effectively doubling your coverage. This means coverage of £170,000 in total.
4. Be careful before you go offshore
Putting your money in an offshore savings account might be appealing as they often pay higher rates of interest, but many people had their fingers burned by the collapse of Icelandic bank Icesave in 2007.
Banks in the European Economic Area (EEC), are covered by their own domestic compensation schemes.
The level of compensation that they pay is 100,000 euros. Those that are based outside the EEC, such as Indian bank ICICI, have to be authorised by the FCA in order to operate in the UK. This means they are covered by the UK’s FSCS.
Find out more in our guide to Offshore savings accounts.
Use our tool to search for the bank or building society you’re looking for, and we’ll tell you who they own, or are owned by, and how much protection you’ll get under that brand.
Armed with this information, you’ll be able to spread your money around different companies to ensure you’re fully protected should the worst happen.
If you see that two or more banking brands share the same banking licence, this means you cannot safely save more than £85,000 across all of them.
Mergers – are my savings still safe?
When two financial providers merge, this can have a significant impact on the protection your savings have if they also merge their FCA authorisation. Below, we provide an update on some of the most recent and largest mergers.
Lloyds and TSB
In 2013, hundreds of Lloyds TSB branches were rebranded and millions of customers were moved to a standalone TSB. Lloyds was forced to offload TSB after being bailed out at the height of the financial crisis.
Spanish bank Sabadell agreed to buy TSB in 2015, aiming to turn the bank into a major competitor to the big five lenders in the UK.
Lloyds and HBOS
Lloyds (then Lloyds TSB) and HBOS (formed by the 2001 merger of Halifax and the Bank of Scotland) retained their separate FCA registrations after their merger in 2009.
Customers with a Lloyds savings account and an HBOS savings account have £85,000 protection with each.
However, each of these banks own several different brands under the same licence, so you should use out tool above to ensure your funds are completely safe.
Santander, Alliance & Leicester and Bradford & Bingley
The takeover of Alliance & Leicester by Spanish bank Santander resulted in A&L and Santander being part of the same group. As of 28 May 2010, all Alliance & Leicester business transferred to Santander.
Alliance & Leicester lost its separate banking licence and FSCS protection, effectively halving the FSCS cover for those who had accounts with both brands.
When Bradford & Bingley was nationalised in 2008, savers with Bradford & Bingley accounts had their money transferred to Abbey – owned by Santander – as part of the deal. All Bradford & Bingley deposits now come under the Santander registration.
The Yorkshire BS, Barnsley BS, Chelsea BS and Norwich & Peterborough BS
The Barnsley Building Society merged with the Yorkshire Building Society in December 2008, and it was announced in December 2009 that the Chelsea Building Society would become part of the same institution by 1 April 2010.
On 1 November 2011, the Norwich & Peterborough Building Society was added to the Yorkshire Building Society group. As with Nationwide, only the first £85,000 held by savers across the three societies will be guaranteed.
Post Office accounts
On 1 November 2010 Post Office savings accounts were transferred from the Bank of Ireland to a new UK subsidiary. Bank of Ireland UK, as it is now known, is authorised and regulated by the FCA.
Before the transfer took place, any savings you had with the Post Office were covered by the Irish Deposit Scheme, of which the Bank of Ireland who provided the Post Office accounts was a member. Your savings were protected up to €100,000 and further deposits were covered by a top-up guarantee scheme operated by the Irish Government.
Since the transfer, your savings are now covered under the FSCS up to £85,000.
The Co-operative and Britannia
Since The Co-operative and Britannia merger in 2009 only the first £85,000 held across both the Co-Op and Britannia is covered.
The Skipton and Scarborough building societies
The same applies to savers with Skipton and Scarborough building societies – only the first £85,000 across both building societies is protected after they merged in 2008.
Nationwide BS, Cheshire BS, Derbyshire BS and Dunfermline BS
Since December 2008, Nationwide Building Society has taken over the Cheshire, Derbyshire and Dunfermline building societies.
It's important to be aware you will get just one set of FSCS protection across all of the brands.
Clydesdale and Yorkshire Bank, and Virgin Money
This merger was announced in June 2018, and will see Clydesdale and Yorkshire bank brands disappear from the high street, and replaced with Virgin Money - despite the fact that the Clydesdale and Yorkshire Bank Group (CYBG) is in control of the takeover.
The deal was completed in October 2018, with the major changes still yet to come into force.
National Savings and Investments
National Savings and Investments (NS&I) is backed by the Treasury, and therefore not covered by the FSCS. This affords account holders greater protection than that available to FSA authorised banks. In fact, 100% of all NS&I savings are fully protected.
Overseas banks and savings safety
Banks established within the EEA will be covered under their home country’s compensation scheme, giving a level of cover of €100,000 (around £85,000).
If you have savings in an Irish bank you should bear in mind that you are covered by the Irish scheme, not the FSCS. If you want to be covered by the UK compensation scheme, consider switching your savings into an authorised UK provider's savings account.
The UK does not include the Channel Islands, Gibraltar or the Isle of Man. These are Crown dependencies and compensation is governed by their own laws.
For more information on how your bank is authorised and how your savings are protected, visit the Financial Conduct Authority website (www.fca.org.uk) or call the FCA Consumer Helpline on 0800 111 6768 or 0300 500 8082.
Does the FSCS cover mortgages, insurance and investments?
It’s not just your savings that are protected by the FSCS – it also covers investments, mortgages and insurance. The compensation limits are different to savings, and vary depending on the type of product you own.
Current limits for each product area are:
- investments: 100% of the first £85,000 if the firm failed after 1 April 2019; £50,000 if before
- mortgage advice and arranging: 100% of the first £85,000 if the firm failed after 1 April 2019; £50,000 if before
- long-term insurance (eg life assurance): 100% of the claim
- compulsory general insurance (eg third-party motor insurance): 100% of the claim
- non-compulsory general insurance (eg home insurance): 90% of the claim
- general insurance advice and arranging: 90% of the claim. Advice for compulsory insurance is also protected up to 90% of the claim.
Each product type is treated independently under the FSCS rules, so if you choose to bank and invest with the same provider you would be entitled to compensation for each of the products you hold, up to the relevant FSCS limits.
While it's already been noted that the limit for investment compensation will be increased to £85,000, some other intermediation changes are also due to take place.
On 1 April 2019, investment intermediation, life and pensions intermediation, and home finance intermediation all increased from £50,000 to £85,000.
How does the FSCS work for investments?
The compensation rules for investments are more complicated than for savings deposits. The FSCS covers losses if an authorised financial services company is unable to pay claims against it.
The first thing to remember is that investing is inherently risky, so there is no safeguard against funds falling in value, or the company in which you hold shares goes bust.
However, there are a few ways that you are protected when you invest.
Negligent advice or fraud
You have £50,000 FSCS protection for negligent investment advice and fraud, but only if the adviser or firm who gave you the advice is unable to meet the claim.
In April 2019, this will increase to £85,000.
However, if the adviser or company is still operating and gave you poor advice, you could be compensated to a maximum of £150,000. You would need to make a claim to the Financial Ombudsman Service (FOS), rather than the FSCS.
It will investigate your complaint, and force the company to compensate you up to £150,000, plus interest.
It’s important to note that both the FSCS and the FOS only cover advice given by companies or individuals that are authorised by the Financial Conduct Authority (FCA). If you use an unauthorised adviser, you cannot make a claim.
If your investment company goes bust
You have £85,000 FSCS protection if an authorised investment firm goes out of business after 1 April 2019 and cannot return your money; if it went bust before this date, you're covered up to £50,000. An example could be the fund management company you’ve invested with going bust.
In practice, you’re most likely to call upon the FSCS in cases of fraud or mismanagement, rather than a firm simply going bust. This is because investor money is ring-fenced and held by a third party (like a global bank), which means that if your investment provider goes bust, your money should be unaffected.
If you’ve invested in using a platform or fund supermarket, the same applies. Platforms use nominee accounts to hold investor money, which means it can’t be claimed by creditors if the company collapsed.
Unregulated financial products
Some financial products are not regulated by the FCA – stamps, wine, art, overseas property, for example - and never qualify for the FSCS or the FOS.
But there are some exceptions - a number of investments are eligible for compensation if you were advised to buy them, even though they wouldn't be protected if you'd invested in them without being advised to.
One such product is known as an 'unregulated collective investment' (UCIS). These see your money pooled in with other investors to buy assets which are typically hard to value, such as fine wine or overseas property.
If a regulated financial adviser has recommended you invest in UCIS, the Financial Ombudsman could help with a complaint, but only if your investment is pooled together with others. This is because the advice you’ve received is regulated, even though the product is not.
The individual or company that gave you advice must still be operating for you to raise a complaint. If they are no longer trading, the FSCS will consider claims in relation to bad advice, because it is considered ‘designated investment business’.
A similar exception is advice to invest in peer-to-peer loans.
Again, the FSCS is restricted to cover losses arising from bad advice, not the platform failing.
To add to the confusion, however, you might be covered for up to £85,000 if you were recommended an unregulated product by an adviser and it was held in a self-invested personal pension (Sipp) after 1 April 2019; if this took place before this date, you might be covered up to £50,000.
This is because advice on a personal pension is protected, regardless of the investments that sit in that pension.
If you find this confusing, you’re not alone. But there is a way to check how you might be protected.
You can use the FCA Register to check if a product, company or individual adviser is regulated and authorised. Before investing any sum of money, it’s always worth using this register to ensure you have the maximum protection.
How do I make a claim with the FSCS?
You can make a claim with the FSCS in a few easy steps, and the process should take one to two hours to complete.
1. Get your documents together
You should do this before you start the claims process. You'll need to provide:
- two forms of identification
- products and advice documents for the product your claiming for
- bank account details - this is where your compensation payment will be sent if it's approved.
If you need to claim under the temporary high balances rule, you'll need to provide evidence, such as a court judgment, will, property sale receipt, letter from an insurer, lawyer, conveyancer, former employer, pension trustees etc - whatever is relevant to your circumstances.
2. Check if you can claim
You'll need to enter a few basic details about the nature of your claim, which company it involves etc, and the FSCS will quickly tell you whether you're eligible to make a claim.
3. Create an online account
You'll need to provide a few personal details to make an online account. You can submit your claim and check up on its progress through this account.
4. Complete your claim application
You'll be asked questions about why you're claiming compensation, be asked to upload scans of your supporting documents and you'll also need to sign the claim electronically before it can be submitted.
5. Keep an eye on your claim
You'll be sent an email to confirm that your claim has been received, but you should keep your eyes peeled in case the FSCS gets in touch to request any further information or supporting documents.
We've outlined how long you can expect to wait to receive compensation in the FAQ section at the bottom of the page.
What will happen to the FSCS protection after Brexit?
While we're waiting for a Brexit deal to be confirmed, it's hard to say what will happen with offshore funds after a leave date has been decided. However, the FSCS has answered some FAQs on the topic:
If you're based in the UK with a UK bank account, the FSCS will continue to protect your money after Brexit: that is, if you're a UK- or EEA-based customer with a UK authorised bank, building society and credit union
If you're a UK citizen based in the EEA banking with an EEA branch of a UK firm: in the event of a no-deal Brexit, the FSCS will no longer protect your savings - but an EEA scheme in the country you're banking in should take over.
There are no plans to change the deposit protection limit: you'll still be covered up to £85,000 per person, per banking institution
The FSCS: your questions answered
See below for answers to some of the most common questions people have about the Financial Services Compensation Scheme.
What should I do if my bank collapses?
At the beginning of the FSCS claim process, you'll be asked a few quick questions to see if it can help with your claim.
Enter your details to find out whether you're eligible, and if so you can continue with your claim.
Money lost from bank or building society deposit failures is often paid back within a couple of days, so the sooner you make a claim the less time you'll be out of pocket for.
I have more than £85,000 in savings - what are my options?
To make sure all of your cash is covered by the FSCS, you should make sure it's saved in different financial institutions, or - if your circumstances permit it - consider opening a joint account.
As we explain above, the FSCS covers up to £85,000 per person, per financial institution. So, a joint account would cover you up to £170,000, and splitting your money between institutions would mean £85,000 is covered in each one.
How do I contact the FSCS?
There are several ways to contact the FSCS.
There's an online contact form, where you can request someone to email, phone or write back to you.
You can call: 0800 678 1100
You can write to:
Financial Services Compensation Scheme
PO Box 300
How long will it take to receive compensation?
This depends what kind of financial product you're claiming compensation for.
Deposit failures - ie when your bank, building society or credit union goes bust - are paid within seven days of making a claim. Most commonly, the FSCS says these claims are paid in two or three days.
Endowment claims, home finance and mortgage compensation typically takes six months to come through.
Straightforward insurance claims take three months, but often this can be longer.
Can the FSCS help with a claim for someone who is deceased?
Yes - but you'll need to provide proof and documentation from all executors and administrators dealing with the deceased's accounts.
For every deceased claim, you'll need to provide one of the following:
- grant of Probate/Letter of Administration
- confirmation that there is no Grant of Probate, Letter of Administration or will if the deceased passed away intestate.
You'll also need to make sure that all executors/administrators review and sign the application form, and copies of ID documentation will be required for everyone that signs the form.