When a bank or financial provider fails, what happens to your money? In the UK, the Financial Services Compensation Scheme (FSCS) steps in to protect you. This government-backed scheme offers a safety net across a wide range of financial products and services. In this article, we break down what FSCS is, how it works, and how you can benefit from it.
What Is the FSCS?
The FSCS (Financial Services Compensation Scheme) is the UK’s official compensation fund for customers of failed financial firms. If a firm authorised by the Financial Conduct Authority (FCA) or Prudential Regulation Authority (PRA) goes bust, FSCS may reimburse you — up to £85,000 per person, per firm.
It’s free to use and funded by the industry, not taxpayers.
Types of Products FSCS Covers
1. Deposits (e.g. Current & Savings Accounts)
- Limit: £85,000 per person, per authorised firm
- Joint accounts: Covered up to £170,000
- Temporary high balances: Covered up to £1 million for 6 months for major life events like house sales, inheritances, or compensation payouts.
2. Insurance Policies
FSCS covers general insurance (motor, home, pet) and long-term policies like pensions and life insurance.
- Compensation:
- 90% of most general insurance claims
- 100% of compulsory or long-term policies like life insurance
3. Insurance Broking
Protects against fraud or mis-selling by insurance brokers.
- Limit: 90% of your claim (no upper limit)
- 100% if the policy is legally required (like car insurance)
4. Investments
FSCS can pay you if poor advice or mismanagement by a firm causes loss and the firm goes out of business.
- Limit: Up to £85,000 per person, per firm
- Note: FSCS doesn’t cover poor investment performance.
5. Mortgage Advice and Broking
If you were given unsuitable mortgage advice and the firm has failed:
- Limit: Up to £85,000 per person, per firm
6. Debt Management
If a debt management firm (authorised by the FCA) goes bust:
- FSCS may cover missing client money held by the firm
7. Funeral Plans
Covers regulated funeral plans that failed on or after 29 July 2022.
- FSCS may arrange a replacement plan or pay compensation
- Limit: £85,000 per eligible person
Who Can Claim?
- Individuals
- Small businesses (turnover under £1M for general insurance)
- Large companies can claim for deposit protection
You must have dealt with a UK-authorised firm and meet FSCS eligibility criteria.
How Quickly Do You Get Your Money?
- Bank deposits: Within 7 days
- General insurance: Within 14 working days
- PPI claims: Within 3 months
- Other claims: Within 6 months
What FSCS Does Not Cover
- Peer-to-peer lending
- Prepaid credit cards
- Christmas savings clubs
- Investment losses from market downturns
- Some online wallets like PayPal
- Mortgage administration or lending
- Marine, aviation, and transport insurance
How to Check if You’re Protected
- Look for the FCA or PRA authorisation number (FRN)
- Use the FCA Register
- Visit fscs.org.uk/protected for brand checks
Final Thoughts
The FSCS exists to give you financial peace of mind. Whether it’s a bank, insurer, or advisor — if they’re regulated and fail, FSCS can protect you. Always make sure your provider is FCA or PRA authorised to enjoy this vital protection.
