Financial Services Compensation Scheme

The Financial Services Compensation Scheme (FSCS) is the UK's statutory deposit insurance and investors compensation scheme for customers of authorised financial services firms. This means that FSCS can pay compensation if a firm is unable, or likely to be unable, to pay claims against it. The FSCS is an operationally independent body, set up under the Financial Services and Markets Act 2000 (FSMA), and funded by a levy on authorised financial services firms. The scheme rules of the FSCS are made by the Financial Conduct Authority (FCA) and are contained in the FCA's Handbook. The FCA also appoint its Board and the FSCS is ultimately accountable to the FCA. The scheme covers deposits, insurance policies, insurance brokering, investments, mortgages and mortgage arrangement.

Financial Services Compensation Scheme
Agency overview
Formed2001
JurisdictionUnited Kingdom
Headquarters15 St Botolph Street, EC3A 7QU
London
Annual budget£79.6m (2019/2020)[1]
Agency executives
  • Marshall Bailey, Chairman
  • Caroline Rainbird, Chief Executive Officer (From 4 May 2019 to 5 June 2023)
Websitewww.fscs.org.uk

FSCS is free to consumers and, since 2001, has helped more than 4.5 million people and paid out more than £26 billion. Since 31 December 2010, maintaining a single customer view has become mandatory for United Kingdom banks and other deposit takers due to new rules introduced by the FSCS.[2]

History
FSCS Advertising Campaign 2016

The FSCS came into existence in 2001 and replaced former multiple schemes. Between 2001 and 2006 the scheme paid out close to 1 billion pounds in compensation. In the period from 2006 to 2011 the financial crisis resulted in compensation of over 26 billion pounds being paid out by the FSCS.[3] In 2008 the FSCS was given a loan by the Bank of England in order to be able to guarantee the deposits of customers of Bradford & Bingley.[4] The compensation limits were last revised in 2010 to bring them into line with the EU (and EEA) deposit guarantee requirements under the European Union directive 94/19/E.[5]

On 31 August 2012 UK authorised banks, building societies and credit unions were required to display information about FSCS protection in branch and online, this included posters and window stickers. This action followed the introduction of new Financial Services Authority (FSA) rules obliging deposit takers to display information about FSCS protection available to consumers. The UK branches of foreign banks from the European Economic Area (EEA) have to specify that their customers are not covered by FSCS and clearly state which national scheme provides protection.

On 14 January 2013 FSCS launched a consumer awareness programme, aiming to reassure consumers and boost confidence, thereby aiding financial stability. It follows on from the disclosure requirements and uses icons of protection to engage with the consumers and highlight the safety FSCS provides to savings and deposits.[6]

Funding

The FSCS is funded by levies on firms authorised by the Prudential Regulation Authority and the Financial Conduct Authority. FSCS's costs are made up of management expenses and compensation payments.[7]

Bank, building society or credit union insolvency

The FSCS protects UK authorised banks, building societies and credit unions up to £85,000 per depositor in the event of their insolvency. If deposits or savings are in a joint account the total of FSCS protection doubles to £170,000. FSCS protection is free and automatic. If anything happens to your bank, building society or credit union, FSCS will automatically refund your savings. In the vast majority of cases savings are refunded in less than 7 days.[8]

From 3 July 2015 some types of temporary high balances of up to £1,000,000 are protected for up to six months.

Compensation limits
Percentages Maximum Compensation
Deposits 100% of the first £85,000 per person per authorised firm
(for claims against firms declared in default from 30 January 2017)[9]
 £85,000
Investments 100% of the first £85,000 per person per firm

(for claims against firms declared in default from 1 April 2019).

 £85,000
Mortgage advice and arranging 100% of the first £50,000 per person per firm

(for claims against firms declared in default from 1 January 2010).

 £50,000
Insurance Business

(e.g. pensions, life assurance, home and travel)

 90% of the claim with no upper limit. Compulsory insurance is protected in full. Unlimited
General insurance advice and arranging

(for business conducted on or after 14 January 2005).

 90% of the claim with no upper limit. Compulsory insurance is protected in full. Unlimited

References

Citations
  1. "Plan and Budget 2015/16 - Financial Services Compensation Scheme".
  2. "Deposit Guarantee Scheme - Customer Review -FSCS".
  3. "Annual Report and Accounts 2011/12" (PDF). FSCS. Retrieved 14 July 2012.
  4. "Your money is safe, FSCS tells Bradford & Bingley depositors" (PDF). FSCS. 29 September 2008. Retrieved 14 July 2012.
  5. "New deposit guarantee limit to be £85,00 0". FSCS. 17 December 2010. Retrieved 14 July 2012.
  6. "About the FSCS - FSCS -FSCS".
  7. "How the FSCS is Funded - Funding Model - Levy Scheme -FSCS".
  8. "Solicitors Ennis | Personal Injury Solicitors | Solicitors Clare".
  9. "Compensation limits -FSCS". www.fscs.org.uk.

Sources
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