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.

PDFMemorandum of Understanding between the FSCS and Bank of England

FSCS-related news and publications

22 January 2021: Jointly with the FCA we published CP4/21 ‘Financial Services Compensation Scheme – Management Expenses Levy Limit 2021/22’. This CP is relevant to all FCA and PRA authorised firms. This consultation closes on Friday 19 February 2021. Please send any comments on the proposed MELL using the online response form on the FCA’s website Opens in a new window

20 January 2021: We published CP3/21 ‘Depositor protection: Identity verification’. This CP is relevant to the Financial Services Compensation Scheme, all PRA-authorised deposit-takers, and insolvency practitioners. This consultation closes on Monday 15 February 2021.

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).

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 19 February 2021

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