The FSCS explained
The Financial Services Compensation Scheme is a UK Government-backed organisation. It provides compensation to individuals if their bank or financial services firm fails. In the savings sector, it typically protects deposits up to £85,000.
The compensation awarded is funded by levies from financial services firms and the scheme is free for consumers. In 2023/2024 alone it paid out £423m to over 19,000 customers of failed firms.
Does the FSCS cover all banks?
The FSCS applies to all financial institutions with UK branches that are authorised by the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA), including banks, building societies, and credit unions.
What is not covered by the FSCS?
Here are the main things not covered by the FSCS:
- Non-regulated products
Unregulated investments such as ‘mini bonds’ or insurance policies, such as a warranty or protection plan on a washing machine or mobile phone, for example.
- Unregulated investment firms
Companies offering ‘riskier’ or unregulated investments like cryptocurrency.
- International institutions
Banks or financial institutions outside of the UK without a UK branch.
- Certain types of debt
Loans from providers that are not regulated by the FCA may not be protected.
- E-money firms or payment services
Customer deposits are held separately, but they are not FSCS-protected.
How can I check if my bank is protected?
You can use the FSCS bank and savings protection checker here to find out if your bank is protected.
Why it’s important to understand bank licences
The protection from the FSCS is based on the bank’s licence, not on how many accounts or banks you have money in. In the UK, several big bank brands share the same licence. This means if you have £100,000 in savings between two banks which share the same licence, the FSCS will only pay you up to £85,000 if the bank fails – not the full £100,000.
How often do banks fail in the UK?
Banks rarely fail in the UK. The last high-profile failures were in 2008 when Northern Rock, Bradford and Bingley, and Lehman Brothers collapsed.
How can I check if my banks share the same licence?
To find out if the banks you have money in share the same licence you can:
- Check the website
It should be clearly displayed. It can also usually be found in their terms and conditions or under ‘About Us’.
- Check the Financial Services Register
The FCA and PRA maintain a list of all the regulated financial institutions in the UK.
- Use Moneyfacts Compare
Moneyfacts Compare offers a comprehensive A to Z list in its “Who Owns Whom?” guide.
If you have more than £85,000 deposited under one banking licence, you don’t necessarily need to move all your money but spreading it around could be a safer way to make sure it’s fully protected.
What are the chances of a bank collapsing in the UK?
If a bank’s ability to operate falls into doubt, investor shares may plummet. This could lead to rising panic amongst customers, who may then start to transfer out their money and investments.
This is just one of the possible reasons why a banking institution may find itself at risk of collapse.
In line with FSCS guidelines, if your UK bank or building society were to collapse, your individual personal funds of up to £85,000 would be covered by deposit protection. This would be up to £170,000 in a joint account.
Please note that these rules apply to UK-regulated banks only; if you’re a UK citizen or company who has stored your savings in a foreign bank, then they will be subject to the rules within that country.
Frequently asked questions
Does the FSCS cover my money if I use a foreign bank in the UK?
The FSCS can cover your money if you use a foreign bank that has a branch in the UK and is registered with the UK regulators. If the bank is not registered, or it doesn’t have a UK branch, then your money won’t be covered.
Does the FSCS cover online banks or only traditional ones?
The FSCS covers both online and traditional banks if they are properly registered with the UK regulators.
What happens if my bank goes under and how do I claim FSCS compensation?
If your regulated bank, building society, or credit union fails, the FSCS will automatically step in and return your money up to the compensation limit. You won’t need to make a claim. For more details and information on other compensation processes, visit the FSCS.
Are pensions protected by the FSCS?
Yes, pensions are protected by the FSCS, but only if they are with a company that is covered by the FSCS. If in doubt, you should check with the company that manages your pension.
This quick-reference guide was prepared by Caroline Revell at Moneyfacts Compare to help you understand how your money could be protected if your bank were to fail.
You can find out more about the coverage offered by the FSCS here.