Savings Guide

How safe are my savings?

Updated: Monday 6 June, 2011

If your bank were to go bust, the UK’s Financial Services Compensation Scheme (FSCS) is your financial safety net.

If your bank were to get into trouble - as many have done over the past couple of years during the financial crisis - then your deposits and savings could sink with it. But you can get compensation.

So if you find yourself in a situation where you have lost all of your money through no fault of your own, and your bank is unable to compensate you for it, then your next port of call should be the FSCS.

As long as there is a clear reason why your provider is unable to pay up and a case for you to receive compensation, then the scheme should be able to help you. Be aware though that each claim will be treated on an individual basis.

What is covered?

In broad terms, the Financial Services Compensation Scheme protects:

• Deposits - current accounts and Individual Savings Accounts (ISAs)
• Insurance policies
• Insurance broking (including travel insurance where the policy is sold alongside a holiday or other related travel)
• Investments, such as ISAs (though only companies authorised by the FSA)
• Home finance (mortgage advice and arrangements).

The scheme should pay out something if the company concerned is “in default” and unable to pay claims for compensation made against it or has ceased trading. To find out, you should visit the FSCS website.

How much am I covered for?

After the FSCS has investigated whether your bank is actually “in default” and established that you are due compensation, then it will pay you for financial loss up to the following limits:

• Deposits: For things such as your current account and savings, you are covered by the scheme for up to £85,000 per person, per FSA authorised institution
• Investments: For any investments you may have lost, you could be able to claim up to £50,000 per person per FSA authorised institution
• Home finance: If you have lost money as a result of home financing, for example unsuitable mortgage advice and/or unjustifiably high arranging fees, then you could be eligible for up to £50,000 compensation per person per FSA authorised institution
• Insurance business: If you have lost money through any insurance company, then you will be entitled to 90% of the claim with no upper limit. In addition, compulsory insurance - such as third party motor insurance - is protected in full
• General insurance advice and arranging: Similarly, for claims concerning general insurance policies on your behalf (such as an insurance broker), you will be entitled to up to 90% of the claim with no upper limit. Again, compulsory insurance is protected in full.

Who funds it?

The FSCS is independent of the government and is funded instead by the financial services industry as a whole.

Every firm authorised and regulated by the Financial Services Authority (FSA) - including banks, insurers, investment companies and financial advisory firms - is obliged to pay an annual levy that goes towards the scheme’s running costs and any compensation payments.

The FSCS does not charge consumers a fee for using its service.

How do I claim?

If you think you might be able to claim compensation from the FSCS, follow these steps:

1. Contact the FSCS
2. The FSCS then investigates and determines whether the firm in question is able to pay your claim
3. If not, the firm is declared in default
4. Fill out an application form and send it back to the FSCS
5. You claim will be reviewed and processed
6. You will be informed of the decision in writing

The length of time it takes to get a decision depends on the individual claim.

However, as a general rule:

For claims against deposit takers (banks, building societies, credit unions etc) it should take between seven and 20 working days.

For claims against other companies (investment firms, mortgage brokers, insurance brokers etc) it should take about six months from receipt of your correctly completed Claim Application Form, or the company being declared in default (whichever is later).