Regulated or unregulated investments: what protection you get

Whether an investment is protected comes down to two things: whether the firm is authorised, and whether the activity it is carrying out is a regulated activity. If both are true, and the firm later fails and cannot pay claims against it, the Financial Services Compensation Scheme (FSCS) can step in. For investments, that protection is up to £85,000 per person, per authorised firm¹.

If either is missing, you are on your own. Most cryptoassets are not FSCS protected because they are not regulated, including Bitcoin and Litecoin³. Peer-to-peer platforms are not protected by FSCS should they collapse⁴. And FSCS does not pay compensation simply because an investment performed worse than you hoped⁵.

The distinction matters most when something goes wrong. FSCS pays when a provider fails, not when a product disappoints. The Financial Ombudsman Service handles complaints about firms that are still trading. Knowing which of the two applies to your situation, and which investments sit outside both, is the difference between having a route to your money back and having none.

What makes an investment regulated: the firm and the activity must both be authorised

Dealing in investments is a regulated activity in the UK, so trading platforms require authorisation from, and are regulated by, the Financial Conduct Authority¹¹. For FSCS protection to apply at all, the investment provider or adviser must be authorised by the Prudential Regulation Authority or the Financial Conduct Authority².

Authorisation is not a blanket. The FCA register is a list of firms and individuals and the permissions they have to carry out regulated financial services activities¹². A firm can be authorised for one activity and not another, which is why the second test matters: the specific thing the firm is doing for you must itself be a regulated activity. FSCS advises asking your firm to confirm that the activity it is carrying out for you is a regulated activity and under what circumstances you would be protected by FSCS if the firm failed¹¹.

The boundary moves. The Financial Services and Markets Act 2000 (Regulated Activities etc.) (Amendment) Order 2025 records that, in the Treasury's opinion, one of its effects is that an activity which is not a regulated activity will become a regulated activity¹³. In other words, something outside the perimeter today may be inside it later, and the protections that follow change with it.

If you invest in a firm which is not authorised by the FCA, you risk losing your money, without any protection¹⁴. The FCA register is the check that settles it: if a firm is carrying out regulated activities without authorisation, that is a major red flag and it is likely to be fraudulent¹⁵. If you are unsure about a financial services company, check the FCA register of regulated companies, and if they are not on it, have nothing to do with them¹⁶.

FSCS protection for investments: up to £85,000 per person, per firm

The investment limit is £85,000 per person, per authorised firm¹. The same £85,000 per person, per firm figure applies to investment provision¹⁷, to investment business protection⁶, to debt management⁶ and to mortgage advice⁶. FSCS may be able to compensate you if you have a valid claim against a firm that has failed, up to £85,000 per eligible person, per firm⁴.

Two features of that sentence do the work. First, "per firm": if you hold investments with two separate authorised firms, each carries its own £85,000 limit. Second, "valid claim": FSCS pays compensation if your financial services provider fails and cannot pay back your money itself². A firm is in default when it cannot pay claims made against it, or is likely to be unable to do so¹⁸.

What FSCS covers, in its own words, includes bad or misleading investment or pension advice, negligent management of investments, misrepresentation, or fraud⁶. What it does not cover is equally specific: FSCS does not pay compensation if your investment does not perform as well as you hoped⁵. Market losses, a fund that underperforms, a share price that falls: none of these are claims.

The £85,000 investment limit sits alongside a higher deposit limit. FSCS protects up to £120,000 per person or company, per authorised firm for deposits at banks, building societies and credit unions⁶. The two are separate pots with separate limits, and the deposit figure is the one most people meet first. Large businesses are usually excluded from FSCS, although there are some exceptions for deposits and insurance¹⁸.

Unregulated investments: crypto, peer-to-peer and other schemes outside FSCS cover

The cryptoasset market is largely unregulated⁷. Most cryptoassets are not FSCS protected because they are not regulated, including virtual currencies like Bitcoin and Litecoin³. Most cryptocurrencies are not regulated by the Financial Conduct Authority, so they are not protected by the UK's compensation scheme¹⁹.

Peer-to-peer lending sits in the same place. Peer-to-peer platforms are not protected by the Financial Services Compensation Scheme should they collapse²⁰. FSCS states that its protection, in relation to claims against failed regulated firms, does not cover investments in P2P loans⁷.

FSCS publishes a list of what it does not cover, and it is worth reading in full before assuming anything is protected. It includes cryptoassets, peer-to-peer lending, money held on pre-paid credit cards, Christmas or other savings clubs, boiler room scam investments, losses arising purely from investment performance, some electronic payment services or currency bureaux, goods in transit, marine, aviation or credit insurance, reinsurance, and mortgage lending or administration⁵.

Unregulated collective investment schemes, also known as non-mainstream pooled investments, are not regulated by the FCA²¹. The FCA does regulate some of the firms and people around them, but not the schemes themselves. If you hold one and the scheme fails, the ombudsman cannot look at the scheme, only at the regulated conduct around it.

How to check whether an investment is protected before you sign up

The check takes minutes and costs nothing. FSCS sets out three steps: check your provider is authorised by the Financial Conduct Authority; ask your firm to confirm that the activity it is carrying out for you is a regulated activity and under what circumstances you would be protected by FSCS if the firm failed; and satisfy yourself on both before you commit money¹¹.

The FCA register is the source of truth. The FSCS protection checker draws its results from the FCA's Financial Services Register, which you can search yourself to check if your firm is authorised²². Searching the register using the provider's firm reference number, and seeing a status of "authorised", tells you FSCS may compensate if the firm fails²².

For pensions, the test is slightly different. The Pensions Regulator advises checking whether the scheme is either regulated by the Financial Conduct Authority or has been independently reviewed to help the employer meet certain standards, known as master trust assurance²³. A workplace pension scheme that is neither should prompt questions.

A few practical habits reduce the risk of relying on the wrong thing:

• Check the firm, not the brand or the website, on the FCA register²².
• Ask the firm in writing which activity it is carrying out and whether it is regulated¹¹.
• Be sceptical of anything described as an investment that is not on the register¹⁶.
• Remember that a regulated firm can still sell you an unregulated product, and that the product is what determines whether FSCS would pay⁷.

Pensions and SIPPs: how cover differs from other investments

Pensions have their own patchwork of protection, and it does not work like an investment account. FSCS cannot protect occupational pension schemes if they fail²⁴. Those are covered, where they qualify, by the Pension Protection Fund, which does not cover unfunded public service schemes²⁵.

Where FSCS does apply to pensions, it is usually through advice rather than the pension itself. FSCS covers bad or misleading investment or pension advice, such as advice to transfer your pension into a self-invested personal pension⁶. The compensation limit for pension advice is £85,000²⁶.

That advice route matters because of what a pension transfer involves. A transfer can mean moving money from one personal pension to another, or from a personal or workplace pension to a self-invested personal pension, a small self-administered scheme or a qualifying recognised overseas pension scheme²⁷. If a regulated adviser recommended a transfer that was not right for you and the firm has since failed, FSCS can consider a claim. If the adviser is still trading, the complaint goes to the Financial Ombudsman Service instead²⁴.

There is a specific protection for unregulated products held inside a SIPP. You might be covered for up to £85,000 if you were recommended an unregulated product by an adviser and it was held in a self-invested personal pension¹⁷. The claim is against the adviser's failure, not the product's, and the fact that the product was unregulated does not by itself remove the protection.

Misleading adverts for unregulated investments like gold and whisky casks

Adverts for unregulated investments have drawn regulatory attention. The Advertising Standards Authority has published advice on financial products and services that are unregulated investments, covering how such promotions must be handled²⁸.

The pattern in these cases is worth recognising. More exotic investments such as cryptocurrency, whiskey casks, property development and art are not regulated by the FCA¹⁵. Scam adverts downplay the risks to your money, for example by talking about how you will own the actual assets they may sell if the investment does not work as expected, or by using legal jargon to mislead you¹⁹.

The Money and Pensions Service has warned consumers to be cautious of unregulated savings schemes that do not provide the same protections as regulated savings accounts²⁹. The same logic applies to investments: an unregulated scheme can be perfectly legal and still leave you with no compensation route if it fails.

If an investment firm fails: claiming compensation from FSCS

FSCS was set up by parliament to pay back money to eligible people when their financial firm fails⁸. It is free to claim: FSCS states it is completely free to claim with it⁸. You do not need to pay anyone to do it for you, and if you are unhappy with the conduct of a claims company, you can complain to the FCA³⁰.

Timing is the first thing to understand. Most FSCS claims take between five months and one year⁹. Where the firm or product is a situation FSCS has not dealt with before, your claim may be on hold until it completes its investigations, which could take at least six months³¹. Deposit claims run on a different clock entirely: FSCS will pay compensation within seven working days of a bank, building society or credit union failing, though more complex cases including temporary high balance claims take longer³².

The date of the underlying business matters. For investment claims, if a claim relates to business conducted before 28 August 1988, FSCS is unlikely to be able to help, as there was no protection in place before then³³. Claims against an insurer, bank or investment firm that failed before 1 December 2001 are covered by the rules governing the separate compensation schemes that existed before that date¹⁸. Other cut-offs apply to other products: mortgage advice and arranging claims need business conducted on or after 31 October 2004, insurance intermediaries claims on or after 14 January 2005, and travel insurance sold alongside a holiday on or after 1 January 2009¹⁸.

Complaining about a firm that is still trading

If the firm has not failed, FSCS is not the route. The Financial Ombudsman Service can help you resolve a problem with your investment, as long as the business you are complaining about is regulated by the FCA¹⁰. If the adviser is still trading, you can complain to the Financial Ombudsman Service²⁴. The same applies to a targeted support provider that is currently trading: you may be able to refer a complaint to the ombudsman³⁴.

The ombudsman looks at conduct, not just outcomes. For a capital protected structured investment complaint, it will consider grounds including that the product was not suited to your circumstances, that the literature was unclear, that the return was lower than expected, that risks were not properly explained, or that the amount invested was too high³⁵. It also looks at whether the firm led you into buying the investment in any way, and if it did advise, whether the advice was suitable, including whether the literature clearly explained the return calculation, the maximum potential return, features like averaging and management strategies, the risks of the underlying indices, the end of term, and charges or surrender penalties³⁵. If it thinks you lost money because you received the wrong investment advice, it will tell the firm involved to put things right and pay compensation for distress or inconvenience³⁵.

Complaints about investments are a steady stream. In the first quarter of 2026/27, the ombudsman recorded 42 complaints about investment trusts³⁶. In January to June 2024, it recorded 2,305 complaints in the investments sector including firms below threshold³⁷. In the third quarter of 2025/26, its advisory service recorded 43 new complaints about mixed investment portfolios³⁸.

The ombudsman's case studies show the range of what reaches it. One consumer contacted it to complain about a cryptocurrency investment scam¹⁴. Another involved transferring money to an unregulated broker³⁹. A third concerned a spread-betting company that, the consumer said, did not explain the nature of the trade properly⁴⁰.

Where protection stops

The limits are firm and worth stating plainly. FSCS does not cover poor investment performance⁵. It does not cover cryptoassets, peer-to-peer lending, or losses arising purely from investment performance⁵. It cannot protect occupational pension schemes if they fail²⁴. It does not cover unregulated collective investment schemes, because the FCA does not regulate them²¹.

The ombudsman's reach stops at the regulated perimeter too. If you invest in a firm which is not authorised by the FCA, you risk losing your money, without any protection¹⁴. That is the sentence to remember when an opportunity looks too good to be missed.

Free, impartial help exists. FSCS itself is free to claim with⁸. The Financial Ombudsman Service is free to consumers. MoneyHelper, the government-backed money guidance service, covers banking and insurance choices⁴¹. For scams, the Northern Ireland government's advice pages and Age UK's investment scam guidance set out the warning signs¹⁶. None of these can recover money from an unregulated scheme that has failed, but they can tell you where a legitimate claim lies.