If your bank, building society or credit union went bust, you’re entitled to compensation through the Financial Services Compensation Scheme.
This is also the case for joint accounts and if you have money with two banks in the same banking group.
The Financial Services Compensation Scheme (FSCS) can pay out compensation to people who end up out of pocket because a bank or other financial services provider goes bust.
It also helps people who lose money because of poor advice from a financial adviser or organisation that has since gone out of business.
You could get compensation if any of the following arises:
- You lost money in deposit accounts with a bank, building society or credit union if the firm fails. This is as long as you didn’t have more than £85,000 with a single institution.
- Your insurance company goes bust. The scheme can pay protected claims and try to arrange for, or help with, the transfer of the insurance business to another company. This is if it’s cost effective and practical.
- Your pension provider goes bust. The scheme only covers pensions regulated by the Financial Conduct Authority
- A debt management firm that you dealt with goes bust and owed you money.
- You lost money because you got poor financial advice, or your financial services provider committed fraud. In this case, the scheme might cover you if the financial services provider is unable, or likely to be unable, to pay claims against it.
- If you have a temporary high balance, you have protection under the Financial Services Compensation Scheme (FSCS) for up to £1 million. This is for up to 6 months from the date the account was first credited.
Temporary Cover for high balances
Cover for temporary high balances is only available to individuals – not companies. If, for example, you sell your home and so have an unusually high balance in your account. Your balance might be temporarily protected if your bank goes bust, even if it’s higher than the £85,000 limit. This is for six months from when the account was first credited.
You’re not covered by the Financial Services Compensation Scheme (FSCS) if:
- The company is still in business. You must complain to them first, and then take your case to the Financial Ombudsman if you’re not satisfied. The scheme does cover future claims against firms still in business.
- The firm wasn’t responsible for your loss. For example, if your loss was caused by an underlying investment going bust.
- The company wasn’t authorised by the Financial Conduct Authority or the Prudential Regulation Authority.
- The company was based in the European Economic Area (EEA). All deposit-takers with headquarters in the EEA must sign up to their home country’s deposit compensation scheme. All European countries must have a compensation limit equivalent to €100,000.
- Your claim relates to business that took place before a certain date. This date varies depending on the type of claim.
- Your firm is a payments or e-money business. Money held with payments and e-money firms is not protected by the FSCS.
There are limits on what the scheme will pay out and you need to be careful what you hold with each bank, building society and credit union.
Cash you put into UK banks or building societies – that are authorised by the Prudential Regulation Authority – is protected by the Financial Services Compensation Scheme (FSCS).
The FSCS deposit protection limit is £85,000 per authorised firm and if you have more than one account with the same bank or building society. The maximum you would get is still £85,000.
This is even if the total of all your different accounts with the same bank added up to more than this. The level of protection you have will depend on which banks and building societies your accounts are with.
The FSCS will only pay out its maximum of £85,000 per person for each ‘authorised institution’ or banking group.
Some bank brands are owned by a larger bank company. For example, First Direct is owned by HSBC.
So, if you had £80,000 with First Direct and £10,000 with HSBC, you would have a total of £90,000 with HSBC Bank Plc. That means £5,000 wouldn’t be covered by the FSCS.