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Compensation over bank failures has changed

Some victims of bust financial firms will get more


Compensation paid to victims of financial services firms, including banks, that go bust has been streamlined to make it easier to understand.

The changes, which come into force today, include new compensation limits that will mean some consumers will be able to claim more – but those with smaller claims are likely to get less than before.

Compensation scheme

If your bank goes under and your savings are lost, or you have a claim against a financial services provider – for, say, mis-selling – but they’ve gone bust, you can turn to the Financial Services Compensation Scheme (FSCS) for compensation. 

If you know the limits of the compensation scheme before you invest, you’ll know how much of your money would be protected, so the idea of the changes is to make clearer the cover the FSCS provides. 

Compensation limits for claims involving investment or home finance advice (such as mortgages) will increase to £50,000, bringing the compensation limit for these in line with the existing £50,000 limit for savings claims.

The new limits will apply to claims against firms declared in default on or after 1 January, 2010 following a rule change announced by the Financial Services Authority last year.

Maximum pay-outs

Compensation for non-compulsory insurance (such as private medical insurance and travel insurance) will be paid at 90%, with no upper limit. Cover for compulsory insurance (such as car insurance) will remain at 100% protection with no upper limit. 

For more information on the FSCS and the compensation available if a financial services provider goes bust, read the .


Since 7 October, 2008 the FSCS has protected up to £50,000 of an individual’s savings held with each authorised provider (previously the limit was £35,000). It also covers investments, mortgages and insurance.

Each product type is treated independently, so if you bank and invest, for instance, with the same provider you would be entitled to compensation for each of the products you hold, up to the FSCS limits.

Summary of the new limits

The new limits are as follows:

  • provision and mediation of investments: protection up to £50,000
  • home finance mediation: advising on or arranging a mortgage: protection up to £50,000
  • non-compulsory insurance provision (both general insurance and life insurance): protection for 90% of the claim, with no upper limit
  • non-compulsory general insurance and pure protection contracts (such as life insurance, critical illness cover and income protection insurance): protection for 90% of the claim, with no upper limit.

For more information on protecting your savings, read the .

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