Financial Services Compensation Scheme

The Financial Services Compensation Scheme (FSCS) is the UK's statutory compensation scheme for customers of UK authorised financial services firms. This means it can step in to pay compensation if a firm is unable, or likely to be unable, to pay claims against it. Compensation can be in any form and by any method it determines is appropriate. It is an operationally independent body, set up under the Financial Services and Markets Act 2000 and funded by a levy on authorised financial services firms.

The rules of the FSCS are made by the Financial Conduct Authority (FCA) and are contained in its handbook. The FSCS board of directors is appointed by and ultimately accountable to the FCA. It covers deposits, insurance, debt management, funeral plans, insurance, investments, pensions, mortgages and payment protection insurance to varying amounts.

FSCS is free for consumers to use 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 rules it introduced.

There is currently a review on whether to increase insurance coverage from the current 90% to 100%, in order to align it with the rest of the protection regime.

History
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. 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. 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.

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.

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.

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 for deposits is free and automatic. If anything happens to your bank, building society or credit union, FSCS will automatically pay you compensation. In the vast majority of cases savings are refunded in less than 7 days.

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