Financial Services Compensation Scheme

The Financial Services Compensation Scheme provides protection for customers of failed financial services firms.
The Prudential Regulation Authority (PRA) is 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.

2017 updates

May 2017

31 May: As set out in PS25/16 ‘Implementing risk-based levies for the Financial Services Compensation Scheme deposits class’, FSCS compensation costs levies will be adjusted for the degree of risk incurred by deposit takers for the first time this year. The levy will be included in the Financial Conduct Authority (FCA) Regulatory Fees and Levies invoice that firms will receive in July 2017.

Compensation costs levies were previously based solely on the proportion of covered deposits held by a firm. As required by the recast Deposit Guarantee Schemes Directive, these levies will now also be adjusted for the degree of risk the firm incurs. Wholesale deposits are also included in covered deposits for the first time. Legacy cost levies are not affected by the risk adjustment.

A firm’s risk adjustment is calculated using a number of quantitative indicators, such as capital, leverage, liquidity, and asset quality.

A firm’s aggregate risk weighting will be included on its invoice from the FCA. More information on the risk adjustment can be found in the Statement of Policy ‘Calculating risk-based levies for the Financial Services Compensation Scheme deposits class’.

More detail on the Regulatory Fees and Levies invoice is available on the FCA website.

If you have further questions on receipt of your invoice, please speak to your usual PRA supervisory contact.

Amounts of compensation: banks

Deposits held in banks, building societies and credit unions (including in Northern Ireland) that are authorised by the PRA are protected up to this limit. 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, i.e. 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.

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 (e.g. by splitting their deposits across different PRA-authorised firms).

International banks in the UK

Depositors in some overseas firms in the UK (not including the Channel Islands or Isle of Man) are protected by the FSCS up to the deposit protection limit.

These include:

  • UK-incorporated subsidiaries of European Economic Area (EEA) deposit-takers
  • UK-incorporated subsidiaries of non-EEA deposit-takers
  • UK branches of non-EEA deposit-takers authorised by the PRA to accept deposits in the UK.

Eligible depositors in UK branches of EEA banks are protected by the deposit guarantee scheme in the bank’s home state, usually up to a limit of €100,000. They are not covered by the FSCS. For more information on the extent and nature of non-UK deposit guarantee schemes, please refer directly to those schemes. If you are not sure how your money is protected, you can contact your bank for information.

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, 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.

  2. Not be a reinsurance contract.

  3. Be issued by a relevant firm through an establishment in the UK, another EEA state, the Channel Islands or the Isle of Man. Generally the policy will be protected by the FSCS if the policy is issued by:
    • A UK based insurer with a UK establishment (e.g. a UK firm, a UK branch of an EEA or non-EEA firm, a UK insurer providing cross-border services in another EEA state).
    • An EEA insurer providing cross-border business into the UK (e.g. via a website).
    • A UK branch in another EEA state.
    • An insurer with an establishment in the Channel Islands or Isle of Man.
      FSCS cover is not available to policyholders with claims against firms that do not have the relevant UK or EEA passport authorisation to bring them within the scope of FSCS cover. This includes any policyholder of a subsidiary of a UK group based in any non-EEA state.
  4. Relate to a protected risk or commitment:
    • For policies issued by a UK-based insurer, the risk or commitment must be located in the UK, another EEA state, the Channel Islands or Isle of Man.
    • For policies issued through an EEA insurer with an EEA establishment providing cross-border services into the UK (e.g. via a website), FSCS protection covers UK risks or commitments only.
    • For policies issued by a UK branch in another EEA state, the risk or commitment must be situated in the UK or another EEA state.
    • For policies issued through an establishment in the Channel Islands or Isle of Man, the risk or commitment must be situated in the UK, Channel Islands or Isle of Man.
    • For more information on how ’risk or commitment’ is determined, refer to section 9.5 of the Policyholder Protection Part of the PRA Rulebook.

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

These lists set out the UK-authorised (i.e. regulated by the PRA) and European Economic Area (EEA)-authorised insurers operating in the UK. We update these lists twice a year.

Lists of UK-authorised insurers and EEA-authorised insurers

We update our list of Lloyd’s of London syndicates annually.

List of Lloyd's of London syndicates

Historical versions of the insurers lists are available.

This page was last updated 05 January 2018
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