Are credit unions covered by the FSCS?

Savings held in a UK credit union are covered by the Financial Services Compensation Scheme (FSCS), the same scheme that protects money in banks and building societies. The Welsh Government states plainly that credit union loans and savings are protected by the scheme¹, and credit unions themselves say the same on their own savings pages².

The limit is £120,000 per person, per authorised firm. The FSCS puts it as protecting "up to £120,000 in total across all accounts you hold with the credit union"³, and MoneyHelper gives the same figure for credit union accounts⁴. If the credit union fails, the FSCS normally returns the money automatically within seven working days, with no claim form to fill in⁵.

Credit unions are small, member-owned and often local, which is why people ask whether the usual safety net applies to them. It does. What follows is how the cover works in practice, where the limit bites, and the cases where it does not apply at all.

Credit union savings are covered by the FSCS

A credit union is a financial co-operative owned by its members. Members save into it and borrow from it, and the savings are usually described as shares because members hold a stake in the organisation rather than being ordinary customers. That language causes confusion: shares in a company can fall to nothing, but credit union shares are deposits for protection purposes.

The FSCS covers deposits, insurance, investments, pensions and mortgage advice when a UK-authorised financial firm fails⁸. Credit unions sit in the deposits part of that list. The Welsh Government's consumer guidance confirms that both loans and savings in a credit union are protected by the scheme¹, and individual credit unions repeat the point: Enterprise Credit Union says its savings are protected by the FSCS², and White Cart Credit Union says members' savings are protected by the scheme².

The protection is automatic. You do not apply for it, opt into it or pay for it, and it does not depend on which credit union you use or how long you have been a member. It follows the firm's authorisation, not the size of the organisation.

FSCS protection: up to £120,000 per person

The standard limit is £120,000 per person, per authorised firm. The FSCS states that it protects "up to £120,000 in total across all accounts you hold with the credit union"³, and its general guidance confirms the same figure for banks, building societies and credit unions⁵. MoneyHelper gives the identical number for credit union accounts⁴.

Two things about that limit matter more than the number itself.

First, it is per firm, not per account. If you hold a savings account, a cash ISA and a current account with the same credit union, the balances are added together and the total is measured against one £120,000 limit. Saver Plus sets this out directly, saying funds held in all your credit union accounts combined are protected under the scheme⁹. Opening a second account with the same credit union does not create a second allowance.

Second, it is per person. Each individual member has their own £120,000 of cover, so two people saving with the same credit union have £240,000 of protection between them, provided the money is genuinely held in separate names.

Joint accounts and temporary high balances

Joint accounts get more room. The FSCS says joint accounts are eligible for protection up to the same limit of £120,000 per eligible person⁶, so a joint account held by two people is covered up to £240,000 in total. Each named holder has their own limit, and the money does not have to be split equally for that to apply.

There is also a separate, higher limit for money that arrives suddenly and is only meant to sit in the account briefly. The FSCS can protect temporary high balances of up to £1.4 million for six months⁷. MoneyHelper gives the sale of a house as the standard example¹², and the Bank of England explains that this temporary protection runs above the £120,000 limit for certain types of deposit¹³.

The six months normally starts when the money is deposited. Cumberland Building Society, setting out the rule for its own customers, notes that for joint accounts with a temporary high balance each named person would benefit from protection of up to £1.4 million¹⁴. The FSCS leaflet lists compensation paid for personal injury among the qualifying events¹⁵.

Temporary high balance claims take longer than ordinary ones, because the FSCS has to check that the money came from a qualifying event and that it has not been in the account too long.

Where credit union FSCS cover does not apply

The scheme covers deposits, not everything a financial firm does. The FSCS lists the products it covers as deposits, insurance, investments, pensions, mortgage advice and certain other regulated services⁸, and each of those has its own limits and its own exclusions.

For credit union members, the practical gaps are these:

• E-money and payment apps. The FSCS cannot protect you if an e-money firm or payment services firm fails⁷. Money in those apps is safeguarded under e-money rules, usually held at a separate bank, but if the provider fails you would need to claim from the administrator rather than receiving automatic compensation¹⁶.
• Some insurance claims. Credit insurance, marine and aviation claims are not eligible for FSCS protection¹⁷, and the same applies to goods in transit and contracts of reinsurance¹⁸.
• Debt arrangements. The FSCS does not protect money a debtor pays under an individual voluntary arrangement arranged by insolvency practitioners who are not regulated by the FCA, or money paid for debt advice¹⁹.
• Investments and pensions. These are covered, but under different limits from deposits, and the FSCS handles them through a separate claims process²⁰. Pension advice is protected, so compensation can be paid if an adviser fails after giving bad pension advice²².

One quirk worth knowing: mutual insurers do not appear in the FSCS protection checker, except credit unions that can take deposits⁷. If you search for a credit union and cannot find it, that is not necessarily a sign it is unprotected.

What happens if a credit union fails

If a credit union fails, the FSCS steps in and returns money to members. The process is designed to be invisible to the saver. The FSCS states that if your bank, building society or credit union has failed you do not need to make a claim, and that it will return your money automatically up to the compensation limit²³.

The timescale is short. The FSCS will pay compensation within seven working days of a bank, building society or credit union failing⁶, and its own credit union guidance says that in most cases it will return your money within seven working days from the date your credit union failed³. Its leaflet puts it as aiming to pay deposit compensation within seven days in most cases¹⁹. National Savings and Investments makes the same promise to its own customers, that if your bank goes bust you get your money back automatically²⁴.

Where the money goes depends on what the FSCS holds. It pays by cheque or into another account, and it will contact members directly. Armagh Credit Union describes the scheme as protecting members' savings if a bank or credit union fails²⁵, and London Mutual Credit Union says the FSCS would pay compensation to eligible depositors if the credit union became insolvent²⁶.

How to check your credit union is covered

Cover depends on the firm being authorised, so it is worth confirming before you save. The FSCS advises checking that your provider is authorised by the Financial Conduct Authority²⁰, and its general guidance is to search the FCA register using the firm's reference number and check that the status shows as authorised¹⁷.

There are two quicker signals. The FSCS Protected badge indicates that a PRA-authorised bank, building society or credit union is protected by the scheme⁶, and firms that display it are making that statement publicly. The FSCS also publishes lists of the banks, building societies and credit unions it covers, and its checker covers credit unions that take deposits⁷.

If a credit union is not on the FCA register and does not appear in the FSCS lists, treat the money as unprotected until you have confirmed otherwise. The FSCS explained page sets out how the scheme works across all product types, and FSCS compensation limits covers the different caps that apply to deposits, investments and insurance. If you are weighing up where to save, credit unions explains how they differ from banks, and savings accounts covers the wider market.