The Financial Services Compensation Scheme (FSCS)

You may have heard of the Financial Services Compensation Scheme. But what exactly is it, how does it safeguard your money and how can you make sure you’re covered? We take a look.  

You may have heard of the Financial Services Compensation Scheme. But what exactly is it, how does it safeguard your money and how can you make sure you’re covered? We take a look.  

Anelda Knoesen
From the Money team
4
minute read
Do you know someone who could benefit from this article?
Posted 7 OCTOBER 2020

Protection if your bank fails

If you’ve ever applied for a financial product, like a savings account, you’ve probably seen the words 'FSCS protected’ on the details.

This is a promise from the Financial Services Compensation Scheme (FSCS) to protect your money, even if the bank or building society goes out of business.

You can get FSCS compensation for deposits of up to £85,000 and up to £170,000 for joint accounts. Pay-outs are given per person, and per bank, building society or credit union. 

But some banks in the same group share a banking licence and are treated as one bank. And that could limit the compensation you get. For example, HSBC and First Direct are treated like one bank, as are Halifax and Bank of Scotland (but Halifax and Lloyds Bank, although in the same group, are licensed separately).

When you open any new account, it’s always worth checking whether you’re likely to go over the FSCS compensation limit for your bank or banking group. That way you can be clever about where you put your money, splitting it between banking groups to make sure it’s safe.  

You don’t have to make a claim if your bank fails. Your money should be paid automatically by the FSCS.

Who is covered by the FSCS?

Products protected by the bank compensation scheme include:

  • accounts held with a bank, building society or credit union authorised by the Financial Conduct Authority (FCA) or the Prudential Regulation Authority.
  • investments from a firm authorised by the Prudential Regulation Authority or Financial Conduct Authority. 
  • pensions regulated by the FCA, but not occupational pension schemes.
  • insurance regulated by the Prudential Regulation Authority (or an EEA-authorised firm passporting into the UK). In the case of an insurance broker or financial adviser, they must have been regulated by the FCA.

What about the FSCS for business accounts?

The FSCS offers the same compensation limit for small businesses and limited companies as individual savers – which is up to £85,000.

Small businesses will have to meet eligibility criteria to make a claim for compensation with the FSCS. This is assessed on a case-by-case basis and varies for different types of claim.

If you’re a joint account holder in a business, remember that a business partnership is counted as a single claim, not one claim per partner. This means the total you’ll be able to claim is limited to £85,000 per eligible business account.

Temporary high balances

Do you have an unusually large amount of money in your bank account, perhaps because you’ve sold a property or received an insurance pay-out? Don’t worry, this shouldn’t be a problem in the short-term.

The FSCS protects temporary high balances of up to £1 million for up to 12 months. But you may have to provide proof of why you have the money – a property sale receipt, for example.

Is your money protected?

  • The FSCS only covers banks and building societies authorised by the Financial Conduct Authority or the Prudential Regulation Authority
  • If your account is with a bank based in the European Economic Area (EEA), you won’t be covered by the FSCS but you may have protection from a financial compensation scheme in the bank’s home country.
  • You might have money with different banks that are actually part of the same banking group. If this is the case, the FSCS will treat them as one bank – so you’ll only be compensated up to the £85,000 (or £170,000) FSCS limit, regardless of how much you have in each account.
  • FSCS coverage begins at different dates for different types of products.
  • The FSCS can cover customers of firms that are ‘in default’ – that is, one that’s unlikely to be able or is unable to pay claims against it. If you have a dispute with a company that’s still trading, you might want to contact the Financial Ombudsman Service or the Citizens Advice Bureau.

To find a list of banks covered by the FSCS – and see whether they share a banking licence – check out the Financial Conduct Authority’s Financial Services Register. And you can see if your money is fully protected with the FSCS online Protection checker.

Compare savings accounts

Compare quickly and easily

Compare now
Compare savings accounts quickly and easily Compare now

comparethemarket.com uses cookies to offer you the best experience online. By continuing to use our website, you agree to the use of cookies. If you would like to know more about cookies and how to manage them please view our privacy & cookie policy.