Created in 2001 as a result of the Financial Services and Markets Act 2000, the Financial Services Compensation Scheme (FSCS) is the UK’s deposit insurance and compensation scheme for customers of authorised financial service companies. If you’re wondering what all that means and why it’s important, here’s what you need to know.<\/p>
The FSCS is there to protect your money if the financial institution holding it goes bust. It applies to institutions such as banks, building societies and credit unions which have been authorised by the Prudential Regulation Authority. <\/p>
Crucially, the FSCS does not apply to “e-money” institutions. There are e-money firms which offer, for example, pre-paid cards which you top up to use for transactions in the UK or abroad. Money you deposit in such accounts is not protected as it is when you deposit it in a licensed bank, so if an e-money firm went bust, you might not get back all your money.<\/p>
If you hold a current or savings account<\/a> with a bank that’s covered by the FSCS, and that bank gets into trouble and fails, the FSCS will ensure that you won’t lose eligible savings up to \u00a3120,000. That last part is important \u2013 any amount you hold over \u00a3120,000 in one institution is highly unlikely to be protected.<\/p> For joint accounts, each account holder can usually make a separate claim.<\/p> It’s worth being aware that if you have more than \u00a3120,000 spread across multiple bank accounts, but your accounts are ultimately part of the same banking group that holds one licence for all the banks involved, you won’t get more than \u00a3120,000. You can search the FSCS register<\/a> to find out the banks to which this applies.<\/p> Since 2011, the FSCS has provided over \u00a360 million in compensation to claimants. It’s independent of the government and the financial services industry and is funded by levies paid by authorised financial services firms.<\/p> It’s also really important to understand the FSCS’s eligibility rules, as it’s these that will determine who receives protection and who doesn’t. Set by the UK’s financial service regulators, the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA), the following are the FSCS’s eligibility criteria:<\/p>Am I eligible to claim compensation?<\/h3>
How do I make a claim?<\/h3>