If your bank, building society or credit union went bust you would be entitled to compensation through the Financial Services Compensation Scheme for a maximum of £85,000. Find out what happens 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 who has since gone out of business.
The scheme covers several different kinds of financial services.
You could get compensation if:
It’s worth noting that depositors with temporary high balances might have protection under the FSCS for up to £1m, for up to six months from the date the account was first credited.
Cover for temporary high balances is only available to individuals and not to companies.
If, for example, you sell your home and as a result have an unusually high balance in your account, your balance might be temporarily protected if your bank goes bust, even if it is higher than the £85,000 limit.
You are not covered by the Financial Services Compensation Scheme if:
If you think you’ve been sold a product that wasn’t suitable for you and the firm has gone bust – mis-selling – you might be able to claim compensation.
When a bank or building society goes out of business the Financial Services Compensation Scheme, will automatically pay out depositors with eligible deposits up to £85,000.
Customers of other types of financial services may have to contact the FSCS directly.
There are limits on what the scheme will pay out.
You need to be particularly careful how much money you keep with each:
If you have savings above the compensation threshold, how you spread your money between different banking groups.
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.
The maximum you would get is still £85,000, 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 Financial Services Compensation Scheme will only pay out its maximum of £85,000 per person, for each ‘authorised institution’ or banking group.
Some bank brands are actually 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 would not be covered by the FSCS.
If you have a joint account, the Financial Services Compensation Scheme deposit protection limit is £170,000.
It is completely free to make a claim with the Financial Services Compensation Scheme.
But, some companies will offer to help you make a claim and charge you a fee.
This can be as much as a quarter of your compensation plus VAT – so if you got £2,000 back you could end up paying the company as much as £600.
This article is provided by the Money Advice Service.