FSCS: How it Protects Your Savings and Investments
The Financial Services Compensation Scheme guarantees that if you have money with a regulated financial firm that goes bust you will get your money back, up to £85,000 per institution.
What is the Financial Services Compensation Scheme?
The Financial Services Compensation Scheme – often abbreviated to FSCS – is a safety net that protects your savings and investments if a bank, building society, other financial services firm or insurer collapses.
It is an independent fund set up by the UK government and regulated by the Financial Conduct Authority (FCA). It guarantees that if you have money with a regulated financial firm that goes bust you will get your money back.
You can also use the service to put in a compensation claim for poor advice on products including insurance, mortgages and investments, if the company that provided it has gone bust. It does not protect you, however, if you pick the wrong product for you or buy an investment that loses money.
What does the FSCS protect?
The FSCS protects a wide range of financial products:
- Savings – these can be held within a bank, building society or credit union
- Mortgage advice and arranging
What is the FSCS limit?
The FSCS protects up to £85,000 of savings per person, per financial institution.
It is important to note it is not per bank. The FSCS protection is given to firms authorised by the FCA. In some cases, a firm or bank might be part of a larger group. That group would have authorisation from the FCA that covers all its subsidiaries. As there is only one authorisation, there is only one £85,000 protection per person.
This would mean if you had money with more than one bank that was in that group, your limit for FSCS protections would be £85,000 across all accounts.
For example, Halifax and Bank of Scotland are both part of the same banking group. So, if you had £50,000 in a Halifax account and £50,000 in a Bank of Scotland account only £85,000 of your total £100,000 would be protected by the FSCS.
It is also worth noting that the £85,000 limit is per person. So, if you have a joint account, up to £170,000 would be protected by the FSCS.
When does the FSCS limit rise to £1m?
In certain situations, you can have temporary FSCS protection of up to £1m.
The increase lasts for six months after certain life events to give you short-term protection if you suddenly come into a large amount of money.
Life events that are covered include:
- Receiving an inheritance
- Being made redundant
- Getting an insurance or compensation payout
- Selling your main home (not a buy-to-let or second home)
How do I check if my money is protected by the Financial Services Compensation Scheme?
Your money is protected by the FSCS if it is held in a bank, building society or financial firm that is authorised by the FCA.
You can use the FSCS protection checker to see if your accounts are covered. If you put in all your different accounts, it will also warn you if there is any overlap between linked banks that could affect how much of your money is protected.
For example, First Direct and HSBC are linked, so your limit would be £85,000 across accounts with both banks.
How do I make a claim to the FSCS?
If you have savings with a bank, building society or credit union that fails, you don’t need to do anything. The Financial Services Compensation Scheme will compensate you automatically, and, in the cases of banks, building societies and credit unions you should have your money back within seven days after the failure. Other cases may not resolve as quickly.
When you want compensation for poor advice – whether for insurance, investments or mortgages – from a firm that has collapsed, you may need to put in a claim with the FSCS. You can check if you need to make a claim – or whether compensation is automatic with the FSCS pre-screening tool.
If you need to make a claim, you will be directed to do it through the same pre-screening tool on the FSCS website.
Ruth is a freelance journalist with 15 years of experience writing for national newspapers, magazines and websites. Specialising in savings, investments, pensions and property. Read more