Financial Services Compensation Scheme

The Financial Services Compensation Scheme provides protection for customers of failed financial services firms.

Overview

We are responsible for oversight of, and rules relating to, the Financial Services Compensation Scheme (FSCS) in respect of deposit and insurance policy protection. These rules are set out in the PRA Rulebook.

A memorandum of understanding between the FSCS and the Bank of England (exercising its prudential regulation functions) sets out how we work together. This updated MoU was published on 15 July 2022.

Memorandum of Understanding between the FSCS and Bank of England

FSCS-related news and publications

2 November 2023: We published DP2/23 – FSCS general insurance limit which sets out the PRA’s analysis of those areas of general insurance (GI) where the PRA has identified additional FSCS coverage could be warranted to secure an appropriate degree of policyholder protection and possible options to remedy this. The DP seeks input from stakeholders to help in the PRA’s assessment of whether, and for which specific types of GI, current FSCS protection levels may be insufficient, taking account of the potential benefits, costs and risks. It also seeks feedback on whether the definition of small business in the Policyholder Protection Part of the PRA Rulebook remains appropriate. The DP is relevant to the FSCS, insurers authorised by the PRA, EEA insurers in the Supervised Run-off or Contractual Run-off regimes, firms that have assumed responsibility for liabilities from PRA-authorised insurers (successors) and policyholders. Responses to the discussion paper are requested by 24 January 2024.

11 October 2023: We published CP22/23 – Occasional consultation paper – October 2023, which included a proposal in Chapter 2 to amend the Depositor Protection Part of the PRA Rulebook to facilitate the ability of the FSCS to pay compensation to eligible depositors of insolvent deposit takers via electronic transfer. That element of the consultation paper is relevant to the FSCS and of interest to deposit-taking firms and depositors. The consultation closed on 13 November 2023.

14 September 2023: We published PS12/23 - Dealing with insurers in financial difficulties which set out the PRA’s final rules and policy in respect of amendments introduced by the Financial Service and Markets Act 2023 to the Financial Service and Markets Act 2000, particularly in relation to the ‘write-down’ of insurance contracts. The PS is relevant to PRA-authorised insurers (other than friendly societies) with a Part 4A permission. The new rules came into effect on 19 September 2023. 
 
30 June 2023: We published PS7/23 - Depositor Protection which provides the PRA’s response to the final part of the representation to CP9/22 – Depositor Protection. It covers a number of changes to the depositor protection rules and is relevant to all PRA-authorised credit institutions and credit unions. The amendments to the DP rules, SS18/15, SoP – Deposit Guarantee Scheme and SoP – Calculating Risk-based Levies came into effect on 1 July 2023.

31 March 2023: We published PS3/23 – Financial Services Compensation Scheme – Management Expenses Levy Limit 2023/24. This PS is relevant to all PRA and FCA authorised firms but contains no material of direct relevance to retail financial services consumers or consumer groups upon which they might need to act. The FSCS MELL will apply for the financial year ending Sunday 31 March 2024.

31 March 2023: We published PS2/23 - Depositor Protection which provides feedback to part of the responses to CP9/22 – Depositor Protection. It also contains the PRA’s final rules concerning the relevant amendments to the Depositor Protection Part of the PRA Rulebook. The amendments clarify that the FSCS depositor protection regime covers FSCS eligible customers of e-money institutions, authorised payment institutions, small payment institutions, and credit unions should a credit institution holding such firms’ safeguarded funds fail. The changes to DP 6.2 and consequential changes to the rules came into effect on 12 March 2023.
 
8 February 2023: We published CP3/23 - Dealing with insurers in financial difficulties which set out the Prudential Regulation Authority’s (PRA) proposed rules and policy in respect of the changes introduced by the Financial Service and Markets Bill 2022-23 to the Financial Service and Markets Act 2000 concerning insurers in financial difficulties. This CP is relevant to all PRA-authorised insurers (other than friendly societies) with a Part 4A permission. The consultation closed on 31 March 2023. 

12 January 2023: Jointly with the FCA, we published CP1/23 - Financial Services Compensation Scheme – Management Expenses Levy Limit 2023/24. This CP is relevant to all FCA and PRA authorised firms. This consultation closed on Thursday 9 February 2023.

FSCS protection

The UK has now left the European Union. The information below has been updated to reflect how FSCS protection applies following the end of the transition period on 31 December 2020.

The PRA is responsible for rules relating to FSCS protection in respect of deposits and contracts of insurance. Please refer to the FCA for FSCS protection relating to other financial services  products.

Amounts of compensation: deposits

Customer deposits held by banks, building societies and credit unions (including in Northern Ireland) in UK establishments that are authorised by the PRA are protected by the FSCS up to £85,000. This includes, for example, eligible deposits in current accounts, savings accounts, cash ISAs (held with a deposit taker) or savings bonds.

The deposit protection limit applies to the total eligible deposits of each person, per PRA-authorised firm. So for deposits in a joint account, this means that each account holder is protected up to the deposit protection limit, ie the total protection adds up to two times £85,000.

A PRA-authorised firm may own several banking and building society brands. This means that anyone who has deposits in more than one account under a single brand, or multiple accounts under different brands owned by a single firm, is only protected up to a total of £85,000 across all these accounts.

There will be temporary deposit protection for up to 6 months above the £85,000 limit for certain types of deposits classified as temporary high balances, such as the proceeds from private property sales. Protection will be up to £1million in most cases.

People with eligible deposits that add up to more than the deposit protection limit may wish to take steps to keep their deposits fully protected (eg by splitting their deposits across different PRA-authorised firms).

In March 2023, we amended the rules in the Depositor Protection Part of the PRA rulebook to clarify the protection available to eligible customers of e-money institutions (EMI), authorised payment institutions or small payment institutions (together PI), and credit unions (in respect of e-money), if a credit institution holding such firms’ safeguarded funds were to fail. In the event of such a failure, each end customer would be considered against the eligibility requirements and eligible customers would be separately protected up to the £85,000 limit.

Lists of the banking brands and building society brands that share FSCS protection

Lists of the banking and building society brands that share FSCS protection with other brands are available below. These show:

  • certain banking and building society brands;
  • the PRA-authorised firm that owns that brand;
  • the unique ‘firm reference number’ (FRN) of that PRA-authorised firm; and
  • other brands owned by the same PRA-authorised firm that share the same FSCS protection.

A PRA-authorised bank or building society may use several brands. This means that anyone who has deposits in more than one account under a single brand, or multiple accounts under different brands owned by a single firm, is only protected up to a total of £85,000 across all of these accounts.

Not all banks and building societies protected by the FSCS are included on these lists – the lists include only those brands which share FSCS depositor protection coverage with other brands. If your bank or building society does not appear on these lists, you can ask them directly how your money is protected or check the Financial Services Register. The ‘Which firms does the PRA regulate’ page includes lists of PRA-authorised banks and building societies which are updated monthly. Generally, following the UK’s withdrawal from the European Union, eligible depositors of PRA-authorised banks and building societies are protected by the FSCS if the firm holds their deposits in the UK (see below for further information).

Banks and building societies whose deposits are FSCS protected are also required to display FSCS posters at branches listing the brands that share protection, provide depositors with an annual information sheet describing protection, and include a statement regarding protection on depositor statements of account.

Changes to Depositor Protection following the end of the transition period

Depositors with eligible deposits held by UK establishments of firms with Part 4A permission to accept deposits (or deemed Part 4A permission under the Temporary Permission Regime (TPR) or Supervised Run-off Regime (SRO)) are protected by the FSCS.

Generally, deposits held outside of UK establishments are not protected by the FSCS.

Deposits held by UK firms’ branches in the EEA are no longer protected by the FSCS, but may be protected by the relevant EEA State’s deposit guarantee scheme depending upon the depositor protection regime in that EEA State.

Gibraltar

Pending the finalisation of the UK’s proposed new relationship framework between the UK and Gibraltar (the Gibraltar Access Regime), customer deposits held by UK branches of Gibraltarian firms will continue to be protected by the Gibraltarian deposit guarantee scheme (subject to the Gibraltarian deposit guarantee scheme’s regulations). Eligible deposits held in Gibraltarian branches of UK firms will continue to be protected by the FSCS.  

Prior to any changes being made to depositor protection for customers of Gibraltarian firms or Gibraltarian branches, a public consultation of PRA rules will be undertaken.

Insurance contracts: compensation scheme coverage

To be protected by the FSCS, insurance policyholders must have a protected insurance contract and be eligible to receive compensation.

Protected insurance policies

To be protected, an insurance policy issued following the end of the transition period generally must:

  1. Be a ‘relevant’ general insurance contract or a long-term insurance contract. Further details on the types of general insurance contracts and long-term insurance contracts protected by the FSCS can be found in the policyholder protection part of the PRA Rulebook Opens in a new window.

  2. Not be a reinsurance contract.

  3. Generally be issued by a UK authorised firm through an establishment in the UK, Gibraltar, the Channel Islands or the Isle of Man.

  4. Relate to a protected risk or commitment:
     

Eligible claimants

Not all policyholders are eligible to claim compensation from the FSCS. For claims relating to general insurance, most private individuals and small businesses are eligible for protection. For long-term insurance most claimants, including large businesses, are eligible for protection.

Provided that the claim is a protected contract of insurance, there are no exclusions from eligibility for claims under insurance contracts that cover compulsory insurance

Amounts of compensation: insurers

If, on and from 3 July 2015, an insurance firm has been declared in default and the FSCS is satisfied that a claim is protected and the claimant is eligible (in accordance with policyholder protection rules), the following compensation from the FSCS is available:

Compensation for general insurance contracts

  • Where the claim is in respect of a liability subject to compulsory insurance, a liability subject to professional indemnity insurance, or death or incapacity of the policyholder due to injury, sickness or infirmity: 100% of the claim.
  • All other cases: 90% of the claim.

Compensation for long-term insurance contracts

  • 100% of the claim is available for all long-term insurance claims.

For general insurance, the FSCS must calculate the value of the firm’s liability to the claimant in accordance with the contract terms, and pay that amount, subject to any limits, to the claimant.

For long-term insurance, unless the FSCS is trying to secure continuity of cover, it must calculate the value of the firm’s liability to the claimant in accordance with the contract terms as valued in a liquidation of the insurer, or in the absence of this, in accordance with valuation techniques that the FSCS considers appropriate.

This may mean that policyholders will lose some of the value. 

List of insurers covered by the compensation scheme

The PRA prepares lists of insurers authorised and operating in the UK. These lists are currently being updated.

This page was last updated 03 January 2024