When you put money into a bank account or invest through a platform, you want to know it is safe. The Financial Services Compensation Scheme (FSCS) is the UK’s safety net — it protects your money if an authorised financial firm fails. But the protection has limits and conditions that many people do not understand. This guide explains exactly what is covered, what is not, and how to make the most of your protection.
What Is the FSCS?
The Financial Services Compensation Scheme is the UK’s statutory deposit insurance and investor compensation scheme. It was established by the Financial Services and Markets Act 2000 and is funded by levies on authorised financial firms.
In plain terms: if a bank, building society, credit union, or other authorised financial firm goes bust, the FSCS steps in and compensates you. It exists to maintain confidence in the UK financial system and protect consumers.
The FSCS is free to consumers — you never pay for it directly. The cost is borne by the firms themselves.
What Does the FSCS Cover?
The FSCS protects different types of financial products at different levels.
Deposits (Savings and Current Accounts)
- Protection limit: Up to £85,000 per person, per authorised firm.
- What is covered: Current accounts, savings accounts, cash ISAs, and deposits with banks, building societies, and credit unions.
- How it works: If your bank fails, the FSCS will reimburse your deposits up to the £85,000 limit.
Example: You have £100,000 in a savings account at Bank X. If Bank X fails, the FSCS will pay you £85,000. The remaining £15,000 is not covered.
Joint accounts: For joint accounts, the protection limit is £170,000 (£85,000 per account holder).
Investments
- Protection limit: Up to £85,000 per person, per authorised firm.
- What is covered: Stocks, shares, bonds, unit trusts, investment trusts, and other securities held by an authorised firm.
- What this means: The FSCS protects you if the firm holding your investments fails (for example, if it goes insolvent and cannot return your assets). It does not cover losses from investments falling in value.
Important distinction: If you invest £50,000 in shares and they drop to £20,000 because the market fell, that is not covered. The FSCS only kicks in if the firm itself fails.
Insurance
- Protection limit: 100% of the claim for compulsory insurance, 90% for non-compulsory insurance.
- What is covered: Claims against authorised insurance companies for life insurance, home insurance, car insurance, and other policies.
- Compulsory insurance: Buildings insurance (where required by a mortgage lender), employer’s liability insurance, and motor insurance (third-party) are covered at 100%.
- Non-compulsory insurance: Most other policies are covered at 90% of the claim value, with no upper limit.
Example: Your home insurer goes bust and you have a pending claim for £20,000. If buildings insurance is compulsory under your mortgage, you receive the full £20,000. If it is a voluntary home contents policy, you receive £18,000 (90%).
FCA Regulated Financial Services
- Protection limit: Up to £85,000 per person, per authorised firm.
- What is covered: Claims against firms authorised by the Financial Conduct Authority (FCA) for poor financial advice, defective investment products, or mis-sold financial products.
How Does FSCS Protection Work?
When an authorised firm fails, the process typically works as follows:
Step 1: Firm Failure
The firm becomes insolvent or is unable to meet its obligations. The FCA or Prudential Regulation Authority (PRA) usually declares the firm in default.
Step 2: FSCS Is Triggered
The FSCS steps in automatically. You do not need to make a claim in most cases — the FSCS will contact you.
Step 3: Compensation Paid
The FSCS aims to pay deposit compensation within 7 working days of a firm being declared in default. In some cases, it can pay even faster.
For investments and insurance claims, the process may take longer depending on the complexity of the case.
Step 4: Payment Arrives
For deposits, the FSCS usually pays directly into your bank account. For investments, they may transfer your holdings to another firm or pay you the value of your investments up to the protection limit.
What Is NOT Covered by the FSCS?
The FSCS has clear exclusions. Understanding these is essential to avoid false confidence.
Cryptocurrency
Cryptoassets (Bitcoin, Ethereum, and other cryptocurrencies) are not regulated by the FCA for most purposes and are not covered by the FSCS. If an exchange holding your crypto goes bust, you have no FSCS protection.
Peer-to-Peer (P2P) Lending
P2P lending platforms are regulated by the FCA, but the FSCS does not cover losses from borrower defaults. If you lend money through a P2P platform and the borrowers fail to repay, that is your loss.
Foreign Currency Deposits
Money held in bank accounts outside the UK is not covered by the FSCS. The protection applies only to UK-authorised firms.
Investments That Have Lost Value
The FSCS does not protect you from investment losses. If you buy shares at £10 and they fall to £3, that is market risk, not a firm failure. The FSCS only applies when the firm holding your assets fails.
Unregulated Financial Products
Any financial product offered by a firm not authorised by the FCA or PRA is not covered. This includes some overseas investments and unregulated crypto products.
Claims Exceeding the Limit
If your savings or investments exceed the £85,000 limit at a single firm, the excess is not covered.
Money Held with Payment Institutions
Certain payment institutions and e-money institutions have a lower FSCS limit of £85,000, but some may have different arrangements. Always check the FSCS website for the specific firm.
How to Maximise Your FSCS Protection
Split Savings Across Multiple Institutions
If you have more than £85,000 in savings, spread your money across different authorised firms. Each firm has its own £85,000 limit.
Example: If you have £120,000 in savings, you could put £85,000 in Bank A and £35,000 in Bank B. Both deposits are fully protected.
Important: Some banking groups share a licence. For example, Halifax and Bank of Scotland are both part of Lloyds Banking Group. Money held across brands within the same group counts towards the same £85,000 limit.
Check the FSCS website to see which brands share a banking licence.
Use Joint Accounts Wisely
A joint account is protected up to £170,000 (£85,000 per account holder). If you and your partner each have £85,000 in a joint account, both amounts are fully protected.
However, if one partner has £85,000 in a personal account and the joint account also holds £85,000, the personal account holder’s total protection may be exceeded.
Check the FSCS Protection Checker
The FSCS offers a free online tool to check whether your savings are protected.
- Website: fscs.gov.uk/check-its-covered
- Enter the name of your bank or financial firm to see if it is covered and how much protection applies.
Keep Records
Make sure you have up-to-date records of your financial institutions and account balances. If a firm fails, you will need to know where your money is held.
Understand Platform Protection
If you invest through a platform (such as Hargreaves Lansdown, AJ Bell, or Interactive Investor), the FSCS protects your investments up to £85,000 per platform.
If the platform fails, the FSCS will compensate you for the value of your holdings up to the limit. If you hold investments on multiple platforms, each platform has its own £85,000 limit.
Key point: The FSCS protects you against platform failure, not investment losses. If your investments drop in value because of market conditions, that is not covered.
The FSCS and Different Account Types
| Account Type | FSCS Protected? | Limit |
|---|---|---|
| Current account | Yes | £85,000 |
| Savings account | Yes | £85,000 |
| Cash ISA | Yes | £85,000 |
| Stocks and Shares ISA | Yes (firm failure only) | £85,000 |
| Pension (SIPP) | Yes (firm failure only) | £85,000 |
| Fixed-rate bond | Yes | £85,000 |
| Lifetime ISA | Yes | £85,000 |
| Child trust fund | Yes | £85,000 |
| Junior ISA | Yes | £85,000 |
| Peer-to-peer lending | No | N/A |
| Cryptocurrency | No | N/A |
| Premium Bonds | Not FSCS (government-backed) | £50,000 |
Note on Premium Bonds: These are not covered by the FSCS, but they are backed by HM Treasury, which is considered an extremely safe guarantee.
What Happens If Your Savings Exceed £85,000?
If you have more than £85,000 at a single authorised firm and that firm fails, you will only receive up to £85,000 from the FSCS. The excess is treated as an unsecured claim against the failed firm’s estate.
In practice, this means you could lose some or all of the amount above £85,000. The recovery rate for unsecured creditors in bank failures has historically been low — often between 0% and 60%.
This is why splitting your savings across multiple institutions is so important.
Common Questions
Does FSCS protection apply to every bank in the UK?
No. The FSCS only covers authorised UK firms regulated by the FCA or PRA. Banks and building societies operating in the UK under a UK licence are covered. Foreign banks operating through a UK branch may also be covered, but always check.
How do I know if my firm is authorised?
You can check the FCA Register at register.fca.org.uk. Search for your firm to see if it is authorised and what protections apply.
What if my firm is a subsidiary of a foreign bank?
If the UK subsidiary has its own UK banking licence, your deposits are protected by the FSCS up to £85,000. If you are depositing with the foreign parent entity, the FSCS does not apply.
Is the FSCS limit likely to change?
The £85,000 limit is set by the UK government and is periodically reviewed. The current limit has been in place since January 2017 and is aligned with the EU Deposit Guarantee Schemes Directive, though post-Brexit the UK may adjust this in future.
Key Takeaways
- The FSCS protects deposits up to £85,000 per person, per authorised UK firm.
- Investments are protected up to £85,000 if the firm fails, but not if investments lose value.
- Insurance claims are covered at 100% for compulsory policies and 90% for non-compulsory.
- Cryptocurrency, P2P lending, and foreign deposits are not covered.
- Split savings across multiple institutions if your total exceeds £85,000.
- Check the FSCS Protection Checker online to confirm your coverage.
- The FSCS aims to pay deposit compensation within 7 working days.