What is the Financial Services Compensation Scheme (FSCS)?

Protecting your money when financial firms fail

This page was last updated on 3 April 2025

The FSCS covers consumers when financial firms go out of business. For example, if your bank or insurer goes bust and cannot give you your money back, the FSCS may be able to pay you compensation. But this does not apply to every company and the money is only protected up to a certain amount.

Who runs it?

The FSCS is an independent organisation with its own board of directors, although the Financial Conduct Authority and Prudential Regulation Authority oversee its operation.

The FCA and the PRA make the rules that relate to the FSCS. The PRA is responsible for deposits and insurance rules, and the FCA is responsible for rules relating to other activities, eg pension advice and investments.

How is the FSCS triggered? 

This typically happens when a financial services firm is placed into an insolvency process, such as administration or liquidation. This means the company no longer has enough money to pay its debts.

When this happens, the FSCS publishes information about the firm and what customers need to do on its website.

If my bank goes out of business, how much can I get back?

Customer deposits held by banks, building societies and credit unions in the UK that are authorised (ie given permission to operate) by the PRA are protected by the FSCS up to £85,000. This includes deposits in: 

  • current accounts
  • savings accounts
  • cash ISAs
  • savings bonds

The deposit protection limit applies on a per-person basis. So, if it is a joint account, each account holder is protected up to £85,000. In other words, a joint account with two holders would be protected up to £170,000.

But a PRA-authorised firm may own several banking or building society brands. For example, HSBC operates under brands including HSBC Private Banking and First Direct. This means that anyone who has accounts under different brands owned by the same firm is still only protected up to £85,000 across all those accounts.  

There is also temporary protection for up to six months above the £85,000 limit for certain types of deposits classified as temporary high balances (THBs), eg the proceeds from a private property sale. This temporary protection will be up to £1 million in most cases, although there is no limit for THBs that are linked to personal injury or incapacity.

People with eligible deposits that add up to more than the protection limit may wish to split their funds across different PRA-authorised firms.

Are there plans to increase the deposit protection limit?

Yes.

The PRA has proposed increasing the protection limit to £110,000. It also proposed an increase in the limit for certain THB claims from £1 million to £1.4 million. Both would be to account for the effect of inflation since the limits were last changed.

The public consultation closes on 30 June 2025. The PRA will then consider the responses before deciding on whether to proceed with the changes. The Treasury would also need to approve any change.

If approved, this would take effect from 1 December 2025. The new limits would apply to firms that fail from that date onwards.

What if my insurance company fails?

If this happens, the FSCS may be able to protect you. The company that failed must have been authorised by the PRA. Generally, the policy must:

  • be an insurance contract, such as home insurance, life insurance or pension  
  • not be a reinsurance contract
  • be issued by a UK-authorised firm through an establishment in the UK, Gibraltar, the Channel Islands or the Isle of Man
  • relate to a risk or commitment insured in the UK

If an insurance company goes out of business, claims are protected up to 90% or 100% of the loss suffered, depending on the type of policy the claim relates to. For example, whole of life assurance is 100% protected whereas pet insurance is 90% protected.

Where does the money for the compensation come from?

All the authorised firms whose customers are protected by the FSCS pay a fee – or levy – to fund the cost of claims and of running the scheme. 

In other words, the financial firms fund the FSCS themselves. They back up the industry by making sure there is money available in case one of them goes out of business and can't pay its customers back. 

How often does the FSCS have to pay out?

It is rare for large firms to fail. But the FSCS sometimes steps in to deal with claims against smaller firms, such as credit unions. 

Over three financial years (2021-24), the FSCS declared 11 credit unions and one small bank in default. The FSCS paid compensation of about £10 million in relation to deposit claims over those three years – that represents a tiny proportion of the total deposits held in the UK.

How can I claim – and what is the process?

If your bank, building society, credit union or insurance company fails, you do not need to take any immediate steps.

The FSCS will obtain the information it needs to deal with claims from the insolvency practitioner – this is the person appointed to deal with the firm that has gone bust.

In the case of a claim against a failed bank, building society or credit union, the FSCS will often make payments direct to the account holder(s), by electronic payment or cheque. These payments will typically be made within seven days of the firm failing, although complex claims may take longer.

If you have a claim relating to a THB, you will have to provide additional information.

In the case of claims against a failed insurance company, the FSCS may cover the cost of another firm taking over your policy. Or it may make payments to claimants direct.

When a firm fails, the FSCS will publish information on its website about what its customers need to do.

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