Find out how the Financial Services Compensation Scheme protects your savings, and how your mortgage, investments and insurance are protected, too

What is the Financial Services Compensation Scheme (FSCS)?

The Financial Services Compensation Scheme (FSCS) protects customers from losing some of their cash if authorised financial services firms go bust.

It protects up to £85,000 of savings per individual, per financial institution (not just per bank), and also covers mortgages, insurance and investments.

In some circumstances, you could be covered for more than £85,000.

There’s a measure to protect temporary high balances (THBs) – where you have money resulting from things like house sales, redundancy pay or inheritances – when you’ll be covered for some types of funds up to £1m for a limited amount of time.

Originally you were only covered for up to six months, but this is being increased to up to 12 months from 6 August 2020 due to the impact of COVID-19, where it’s felt that those with temporary high balances may need cover for a longer period.

This extension will apply to those with new and existing temporary high balances, meaning cover for existing temporary high balances will be extended to 12 months from its start date.

So money deposited into a UK bank, building society or credit union in February 2020, with the six-month THB coverage due to end in August 2020, will now be protected until February 2021. Similarly, if a qualifying THB is deposited in September 2020, coverage would run until September 2021, as opposed to March 2021.

From 1 February 2021, the temporary high balances time limit will revert back to six months.

This guide explains everything you need to know about the FSCS, how to make a claim, and comes with a handy tool to show how much protection you have with your bank.

Am I eligible for the FSCS?

You can only claim the FSCS compensation in certain circumstances, and certain criteria must be met.

The rules have been set by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA).

The criteria are as follows:

  • the financial services firm must have failed and be unable to return your money itself – ie it is ‘in default’
  • the FCA or PRA must have authorised the firm when you used it
  • you must have actually lost money
  • you’re claiming for personal money you’ve lost – although some businesses and charities may be able to claim in some circumstances.

How much does the FSCS cover me for?

The FSCS covers set amounts for certain financial products – here, we detail the maximum amount you can claim for; you’ll only receive compensation for the money you’ve lost, rather than the maximum amount.

  • banks and building societies: £85,000 per person, per financial institution
  • credit unions: £85,000 per person, per firm
  • debt management: £85,000 per person, per firm, up from £50,000
  • home finance intermediation: £85,000 per person, per financial institution, up from £50,000
  • general insurance: 90-100% depending on the circumstances
  • life and pensions intermediation: £85,000 per person, per firm, up from £50,000
  • long-term care insurance: 100% with no upper limit (if the firm failed after 3 July 2015), up from £50,000
  • investment provision: £85,000 per person, per firm, up from £50,000
  • investment intermediation: £85,000 per person, per firm, up from £50,000
  • payment protection insurance: 90% of total claim (if the firm failed after 1 Jan 2010).

How does the FSCS work for savings and bank accounts?

An important caveat about the FSCS is that it only applies to funds saved within each financial institution with a banking ‘authorisation’ – not each bank account, or even each bank.

So, if you’ve saved more than £85,000 with two banks that are owned by the same institution with just one authorisation, you’re only covered for £85,000 in total.

To make sure your cash is covered, there are four essential steps you should take:

1. Find out who owns your bank

The past few years have seen Lloyds take over HBOS, The Co-operative Bank merge with Britannia, and Santander buy Abbey, Bradford & Bingley and Alliance & Leicester, so you should check to see which financial institution your money is saved with.

Use our ‘who owns who’ tool to see how much cover you’d get.

2. Stay within the £85,000 FSCS limit

If you have more than £85,000 to save, be sure to split it up between more than one banking institution to ensure it’s all covered.

3. Consider a joint account

If you and your partner have saved a significant amount of money and you don’t like the idea of spreading it around multiple banks, consider opening up a joint savings account.

The FSCS covers £85,000 of savings per individual, per financial institution – so by placing your savings in a joint bank account along with your partner, you’re effectively doubling your coverage. This means coverage of £170,000 in total.

4. Be careful before you go offshore

Putting your money in an offshore savings account might be appealing as they often pay higher rates of interest, but many people had their fingers burned by the collapse of Icelandic bank Icesave in 2007.

Banks in the European Economic Area (EEC), are covered by their own domestic compensation schemes.

The level of compensation that they pay is 100,000 euros. Those that are based outside the EEC, such as Indian bank ICICI, have to be authorised by the FCA in order to operate in the UK. This means they are covered by the UK’s FSCS.

Find out more in our guide to Offshore savings accounts.

Tool: who owns who in the savings market?

Use our tool to search for the bank or building society you’re looking for, and we’ll tell you who they own, or are owned by, and how much protection you’ll get under that brand.

Armed with this information, you’ll be able to spread your money around different companies to ensure you’re fully protected should the worst happen.

If you see that two or more banking brands share the same banking licence, this means you cannot safely save more than £85,000 across all of them.

Mergers – are my savings still safe?

When two financial providers merge, this can have a significant impact on the protection your savings have if they also merge their FCA authorisation. Below, we provide an update on some of the most recent and largest mergers.

Does the FSCS cover mortgages, insurance and investments?

It’s not just your savings that are protected by the FSCS – it also covers investments, mortgages and insurance. The compensation limits are different to savings, and vary depending on the type of product you own.

Current limits for each product area are:

  • investments: 100% of the first £85,000 if the firm failed after 1 April 2019; £50,000 if before
  • mortgage advice and arranging: 100% of the first £85,000 if the firm failed after 1 April 2019; £50,000 if before
  • long-term insurance (eg life assurance): 100% of the claim
  • compulsory general insurance (eg third-party motor insurance): 100% of the claim
  • non-compulsory general insurance (eg home insurance): 90% of the claim
  • general insurance advice and arranging: 90% of the claim. Advice for compulsory insurance is also protected up to 90% of the claim.

Each product type is treated independently under the FSCS rules, so if you choose to bank and invest with the same provider you would be entitled to compensation for each of the products you hold, up to the relevant FSCS limits.

While it’s already been noted that the limit for investment compensation will be increased to £85,000, some other intermediation changes are also due to take place.

On 1 April 2019, investment intermediation, life and pensions intermediation, and home finance intermediation all increased from £50,000 to £85,000.

How does the FSCS work for investments?

The compensation rules for investments are more complicated than for savings deposits. The FSCS covers losses if an authorised financial services company is unable to pay claims against it.

The first thing to remember is that investing is inherently risky, so there is no safeguard against funds falling in value, or the company in which you hold shares goes bust.

How do I make a claim with the FSCS?

You can make a claim with the FSCS in a few easy steps, and the process should take one to two hours to complete.

1. Get your documents together

You should do this before you start the claims process. You’ll need to provide:

  • two forms of identification
  • products and advice documents for the product your claiming for
  • bank account details – this is where your compensation payment will be sent if it’s approved.

If you need to claim under the temporary high balances rule, you’ll need to provide evidence, such as a court judgment, will, property sale receipt, letter from an insurer, lawyer, conveyancer, former employer, pension trustees etc – whatever is relevant to your circumstances.

2. Check if you can claim

You’ll need to enter a few basic details about the nature of your claim, which company it involves etc, and the FSCS will quickly tell you whether you’re eligible to make a claim.

3. Create an online account

You’ll need to provide a few personal details to make an online account. You can submit your claim and check up on its progress through this account.

4. Complete your claim application

You’ll be asked questions about why you’re claiming compensation, be asked to upload scans of your supporting documents and you’ll also need to sign the claim electronically before it can be submitted.

5. Keep an eye on your claim

You’ll be sent an email to confirm that your claim has been received, but you should keep your eyes peeled in case the FSCS gets in touch to request any further information or supporting documents.

We’ve outlined how long you can expect to wait to receive compensation in the FAQ section at the bottom of the page.

What will happen to the FSCS protection after Brexit?

While we’re waiting for a Brexit deal to be confirmed, it’s hard to say what will happen with offshore funds after a leave date has been decided. However, the FSCS has answered some FAQs on the topic:

If you’re based in the UK with a UK bank account, the FSCS will continue to protect your money after Brexit: that is, if you’re a UK- or EEA-based customer with a UK authorised bank, building society and credit union

If you’re a UK citizen based in the EEA banking with an EEA branch of a UK firm: in the event of a no-deal Brexit, the FSCS will no longer protect your savings – but an EEA scheme in the country you’re banking in should take over.

There are no plans to change the deposit protection limit: you’ll still be covered up to £85,000 per person, per banking institution

The FSCS: your questions answered

See below for answers to some of the most common questions people have about the Financial Services Compensation Scheme.

What should I do if my bank collapses?

At the beginning of the FSCS claim process, you’ll be asked a few quick questions to see if it can help with your claim.

Enter your details to find out whether you’re eligible, and if so you can continue with your claim.

Money lost from bank or building society deposit failures is often paid back within a couple of days, so the sooner you make a claim the less time you’ll be out of pocket for.

I have more than £85,000 in savings – what are my options?

To make sure all of your cash is covered by the FSCS, you should make sure it’s saved in different financial institutions, or – if your circumstances permit it – consider opening a joint account.

As we explain above, the FSCS covers up to £85,000 per person, per financial institution. So, a joint account would cover you up to £170,000, and splitting your money between institutions would mean £85,000 is covered in each one.

How do I contact the FSCS?

There are several ways to contact the FSCS.

There’s an online contact form, where you can request someone to email, phone or write back to you.

You can call: 0800 678 1100

You can write to:

Financial Services Compensation Scheme

PO Box 300

Mitcheldean

GL17 1DY

How long will it take to receive compensation?

This depends what kind of financial product you’re claiming compensation for.

Deposit failures – ie when your bank, building society or credit union goes bust – are paid within seven days of making a claim. Most commonly, the FSCS says these claims are paid in two or three days.

As for mortgages, investments and insurance cover, it could take much longer – and it depends on the complexity of the case.

Endowment claims, home finance and mortgage compensation typically takes six months to come through.

Straightforward insurance claims take three months, but often this can be longer.

Can the FSCS help with a claim for someone who is deceased?

Yes – but you’ll need to provide proof and documentation from all executors and administrators dealing with the deceased’s accounts.

For every deceased claim, you’ll need to provide one of the following:

  • grant of Probate/Letter of Administration
  • will
  • confirmation that there is no Grant of Probate, Letter of Administration or will if the deceased passed away intestate.

You’ll also need to make sure that all executors/administrators review and sign the application form, and copies of ID documentation will be required for everyone that signs the form.