The Financial Services Compensation Scheme (FSCS) explained

The Financial Services Compensation Scheme, usually just called the FSCS, is the UK's statutory compensation scheme of last resort¹. It pays compensation if your financial services provider fails and cannot pay back your money itself². It was set up by parliament to pay back money to eligible people when their financial firm fails³, and it covers deposits, insurance, investments, pensions, mortgage advice and certain other regulated services when a UK-authorised firm collapses⁴.

The scheme is funded by the financial services industry, not by taxpayers: all the authorised firms whose customers are protected pay a levy to fund the cost of claims⁵. It is free to use⁶, and the compensation limits are set for it by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA)⁴. The FSCS only covers firms authorised by those two regulators to do business in the UK⁶, and it typically steps in when a firm is placed into an insolvency process such as administration or liquidation⁵.

What the FSCS is and when it pays out

The FSCS is not a regulator and not an ombudsman. It does not investigate complaints about firms that are still trading, and it does not top up losses caused by investments falling in value. It pays out only when a firm has failed, and a firm is in default when it cannot pay claims made against it, or is likely to be unable to do so¹¹. In practice this typically follows a formal insolvency process such as administration or liquidation⁵.

The scheme covers seven different types of business: deposits, insurance policies, insurance broking, investment business, mortgage (home finance) advice or broking, debt management and funeral plans⁶. Each type has its own compensation limit, and the limits are set by the FCA and the PRA rather than by the FSCS itself⁴. The FSCS is an independent organisation with its own board of directors, although the FCA and the PRA oversee its operation⁵.

Who can claim also has boundaries. Large businesses are usually excluded, although there are some exceptions for deposits and insurance¹¹. In the case of deposits, large companies are able to claim, though some exclusions apply; for general insurance and other non-deposit claims, a small company must have an annual turnover of less than £1 million to be eligible⁶. There are also cut-off dates by type of business: for investment claims the FSCS is unlikely to help if the claim relates to business conducted before 28 August 1988, for mortgage advice and arranging only business conducted on or after 31 October 2004, and for insurance intermediaries only business conducted on or after 14 January 2005¹¹. Claims against an insurer, bank or investment firm that failed before 1 December 2001 fall under the rules of the separate compensation schemes that existed before that date¹¹.

The FSCS is funded by a levy on the authorised firms whose customers it protects⁵, and its forecasting approach meant it had not needed to raise a supplementary levy since 2020 as of its May 2024 outlook¹². For the customer, the practical point is simpler: the service is free, and it exists as a backstop when everything else has failed.

Savings and current accounts: up to £120,000 per person, per firm

The headline rule for deposits is that the FSCS protects up to £120,000 for each banking group, building society or credit union you have accounts with⁷. That covers current accounts, savings accounts, cash ISAs and savings bonds⁵. The limit applies to individuals and companies, not to accounts⁷: it is the total of your money with one firm that counts, so three accounts holding £50,000 each at the same bank are one £150,000 exposure, of which £120,000 is protected.

The limit is per authorised firm, which is not always the same as per brand. Several well-known brands can operate under one banking licence, and money across all of them counts together. When Tesco Bank's savings, credit cards and loans moved under Barclays, the £120,000 limit became shared between the two banks¹³. The dedicated page on FSCS protection when bank brands share a licence explains how to check which brands count together.

Only the deposits and savings limit is £120,000; the limits for other types of business are lower⁷. The limit applies to money in banks, building societies and credit unions authorised by the PRA¹⁴, and for credit unions the protection is up to £120,000 in total across all accounts you hold with that credit union¹⁵.

If a bank, building society or credit union fails, you do not need to do anything: the FSCS will compensate you automatically, up to the limit¹⁰. Payments are typically made within seven days of the firm failing, although complex claims may take longer⁵. The page on what happens if a bank fails goes through the process in detail.

Joint accounts, trusts and temporary high balances

For a joint account, each holder is treated as holding half the money, so each is covered up to £120,000 and the account as a whole up to £240,000⁸. MoneyHelper gives the same position: if the bank fails, joint account holders automatically get their money back, up to £120,000 per person¹⁶. A couple with £300,000 in a joint account would therefore each hold £150,000 notionally, of which £120,000 each, £240,000 in total, is protected.

Trusts and accounts held through intermediaries work differently. If your funds are held via a wealth management company or an online platform under a non-bare trust arrangement, the maximum of £120,000 applies irrespective of the number of eligible beneficiaries or separate accounts held¹⁷. The narrow page on FSCS cover on trust, client and nominee accounts covers these arrangements in more depth.

Then there are temporary high balances. The FSCS can protect certain exceptional, short-lived deposits of up to £1.4 million for six months, where the money results from a qualifying life event¹⁸. MoneyHelper gives the example of proceeds from the sale of a house: certain qualifying temporary high balances up to £1.4 million are covered for six months¹⁴. A current account credited with such money in the last six months can be compensated up to £1.4 million¹⁹.

The catch is evidence. If a firm fails and you need to claim for deposits above £120,000, you must provide written evidence that your deposits qualify as a temporary high balance⁹. These claims are also treated as more complex, so they take longer than the standard seven working days¹⁰. If you regularly hold more than £120,000 with one firm, the page on keeping savings above the FSCS limit covered sets out the options.

Insurance and pensions: limits depend on the product

Insurance protection depends on the type of policy. The FSCS can protect most types of general insurance at 90% of the claim, without an upper limit¹. Compulsory insurance, such as third party motor, is covered at 100%, as are life insurance, critical illness and income protection. Warranty claims are paid at 90%¹, health claims at 90%²³, and whole of life assurance claims at 100%¹. Flood insurance claims are protected at 90%²³.

Not every insurance claim is eligible. Goods in transit, marine, aviation and credit insurance are not eligible for FSCS protection, nor are contracts of reinsurance for insurance firms, brokers or financial advisers²³. The FSCS can only protect you if the PRA has authorised your insurance provider²³.

Pensions are more complicated, because protection varies with the type of pension product and there are limits to what can be compensated²⁴. If a firm gave you bad pension advice and failed after 1 April 2019, the FSCS can pay up to £85,000 per eligible person, per firm²⁵. Stolen pensions are treated differently again, and the FSCS's guide to pension protection sets out how much cover applies to each type²⁶.

Two boundaries matter most. The FSCS cannot protect occupational pension schemes themselves if they fail²⁵; defined benefit (salary-related) schemes are protected by the Pension Protection Fund instead²⁷. And where a pension transfer is involved, the position depends on the advice given and the firms involved, which the page on FSCS protection for pensions, platforms and funds explains.

Investments and financial advice: up to £85,000 per firm

For investment business, the FSCS protects up to £85,000 per person, per authorised firm²⁸. The same £85,000 limit applies to mortgage advice and arranging⁶, to debt management¹¹, and to bad pension advice from a firm that failed after 1 April 2019²⁵.

What the £85,000 covers is narrower than many people assume. It does not protect you against an investment falling in value: that is the risk you take. It steps in when an authorised firm has failed, for example where it cannot return your assets, or where bad advice from a now-failed firm caused a loss. The FSCS's own question, "Does FSCS protect financial advice?", leads to that distinction: advice is covered, market losses are not²⁸.

The limit is per firm, so spreading investments between different authorised firms gives you a separate £85,000 allowance with each. As with deposits, the firm is the authorised legal entity, not the brand name on the app or the website, so it is worth checking before you assume two providers are separate.

What the FSCS does not protect

The clearest exclusions are the things the FSCS is not allowed to cover at all. It cannot protect e-money firms or payment services firms²⁰. Many app-based accounts are not bank accounts but virtual current accounts covered by e-money rules: your money is kept safe at a different bank, but if the provider failed you would need to make a claim to the administrator rather than rely on the FSCS²⁹. The FSCS's own checker is explicit that it cannot protect you if an e-money firm or payment services firm fails³⁰.

Cryptoassets are outside the scheme. Most cryptoassets, including Bitcoin and Litecoin, are not FSCS protected because they are not regulated³¹. The FCA's own risk summary rules state that the FSCS does not protect qualifying cryptoassets because they are not a "specified investment" under the UK regulatory regime, and the same applies to cryptoasset exchange traded notes³².

Other exclusions by type:

• Insurance: goods in transit, marine, aviation and credit insurance, and contracts of reinsurance²³
• Pensions: occupational pension schemes themselves, which fall to the Pension Protection Fund²⁵
• Debt management: money a debtor pays under an individual voluntary arrangement arranged by insolvency partners, which are not FCA regulated⁶
• Unregulated mutuals: activities of housing associations, sports and social clubs, NHS foundations and co-operative schools are not protected⁴

Large businesses are usually excluded too, though with exceptions for deposits and insurance¹¹. The dedicated page on what the FSCS does not cover works through the full list.

Checking your money is protected before you sign up

The FSCS's own advice is blunt: it is really important to know how much of your money it can protect before you sign up to anything²⁶. The practical way to check is the FSCS protection checker on its website, which tells you whether a firm is covered and up to what limit²⁰. Its results are based on the FCA's Financial Services Register, which you can search yourself to confirm a firm is authorised³⁰.

For insurance, the FSCS states it can only protect you if the Prudential Regulation Authority has authorised your insurance provider, so checking the provider's authorised status before signing up matters²³. If a firm does not appear in the checker, that does not automatically mean your money is unprotected, but it is a reason to stop and check before proceeding³⁰.

MoneyHelper's guidance on choosing a bank account makes the same point from the consumer side: check whether the account is a real bank account with deposit protection, or a virtual account under e-money rules²⁹. The check takes minutes and is the difference between automatic compensation and a claim against an administrator.

How to claim: often you don't need to

For deposits, no claim is needed. If your bank, building society or credit union has failed, the FSCS will return your money automatically, up to the compensation limit³³. It works with the failed firm, the FCA and the insolvency practitioner, and in most circumstances customers will not need to make a claim at all³⁴. The same automatic approach applies to debt management firms that failed after 1 April 2019¹¹.

For other types of failure, a claim is usually needed, and it can be made online. The FSCS states that claiming online is free and it will tell you straight away whether you are eligible³³. Funeral plans sit in between: in most circumstances customers will not need to make a claim, but where arrangements with a new regulated provider are not in place, a nominated representative or next of kin should contact the named funeral director in the original plan and then notify the FSCS by phone, post or live chat³⁴.

Whether you take your claim to a claims management company or come straight to the FSCS, you have to provide the same information³. The step-by-step page on claiming from the FSCS covers the process in full.

How long compensation takes

Timescales differ sharply by type of claim. For deposits, the FSCS will pay compensation within seven working days of a bank, building society or credit union failing in standard cases; more complex cases, including temporary high balance claims, take longer¹⁰. The FSCS's own leaflet puts it as aiming to pay within seven days in most cases⁹, and the Bank of England's explainer says payments are typically made within seven days of the firm failing⁵. Which? reports that deposit failures are paid within seven days of making a claim, and most commonly within two or three days¹³.

The overall figure is the one to plan around: most FSCS claims take between five months and one year³⁵. Deposit claims are the fast exception because they are paid automatically from the firm's records; everything else depends on assessing what happened, which is slower.

If you disagree with a decision, email the FSCS about it and it will try to get back to you within five working days³⁶. Complaints can be made over the phone, in writing or using the contact form, and the FSCS aims to respond within 20 working days³⁷. The narrow page on challenging an FSCS decision explains the appeal route.

Claiming is free: no need for a claims company

The FSCS is a completely independent and free service³⁸, and it is free to customers: the FSCS will never ask you to send it money¹⁸. By claiming directly, you pay no fees and get 100% of the compensation³. A claims management company will take a cut of the same award for doing the same work, since the information required is identical either way³. The page on claims management companies sets out what they charge and when people use them.

One live example shows why the free route matters. The deadline for PPI claims was 29 August 2019, but that deadline does not apply to the FSCS, because it covers claims against companies that are still trading, while the FSCS compensates when financial firms have failed³⁹. You may be eligible to claim with the FSCS if you bought a PPI policy, the information you were given was misleading or insufficient, and the firm that gave you that advice has since failed³⁹. Two points from the Financial Ombudsman's approach carry across: if you used your PPI policy and received a payout, that amount will likely be deducted from your compensation⁴⁰, and where a single-premium policy remains in force, redress includes cancelling it⁴¹.

Finally, the FSCS and the Financial Ombudsman Service do different jobs⁴². The ombudsman deals with complaints against firms that are still trading; the FSCS deals with firms that have failed. The comparison page on FSCS vs the Financial Ombudsman Service shows which to use when.