Great news for UK savers and investors, the FSCS protection limits are being raised to £120,000 from £85,000 from the 1st December 2025.
What is the FSCS?
The FSCS covers a wide range of financial products including bank accounts, pensions, investments, mortgages, and insurance. It is free to use and funded by levies on firms authorised by the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA).
The Financial Services Compensation Scheme (FSCS) is a government-backed compensation scheme that’s designed to protect you from losing money if a regulated financial services firm goes out of business. If an authorised firm goes bust and can’t repay your money, the FSCS will provide compensation up to a certain limit. The aim of the scheme – which was set up in 2001 – is to create trust within the financial services industry and enable people to buy regulated financial services products with confidence.
The FSCS is on of the few government agencies trying to invest in AI to help make the world of investing a safer place using artificial intelligence to help pay out claims quicker. In a recent FT Advisor interview Martyn Beauchamp said “the lifeboat scheme was looking at using AI to help it scour through the tonnes of data and information it receives when investigating claims”.
FSCS Stats From 2024/2025
- £327m in compensation paid to customers
- 32,634 customers compensated across claims, deposits and insurance
- 11,799 decisions made on customer claims
- 7,836 new customer claims received
- 38,666 regulated financial services firms funding the FSCS levy
- 45 financial services firms declared in default
- 477 firms for which compensation was paid, including defaults from prior years
- £56.2m recovered from failed firms
- 85% average customer satisfaction
A consumer survey conducted by FSCS in November 2024 shows the impact of protection on public attitudes.
- 91% felt more confident taking out a product with a provider that was FSCS protected
- 86% said FSCS increased their overall trust in the financial services industry
- 74% were more likely to invest more money if the provider was FSCS protected
- Among all survey respondents*:
- 78% agreed that FSCS contributes to financial stability
- 65% said they were more likely to hold products with more than one provider (rather than relying solely on their main bank)
- 64% said they would take advantage of a better deal — such as higher returns or lower fees — if the provider was FSCS protected
In the 2020/2021 financial year, the scheme paid out total compensation of £584 million to customers of failed financial services firms.
“Our work promotes confidence and trust for consumers using financial services. Ultimately, this supports the UK’s financial stability and long-term sustainable growth of the financial services industry.”
Tina Coates, Chief Communications Officer, FSCS
What is covered by the FSCS?
The FSCS covers a broad range of financial services firms and products. Here’s a look at the types of firms and products it covers and the maximum amount of compensation you can claim if you have suffered financial losses.
- Banks, building societies and credit unions: up to £85,000 per person, per institution, or £170,000 for joint accounts. There is protection for temporary high balances up to £1 million for six months from when the amount was first deposited.
- Investment firms: up to £85,000 per person, per firm.
- Pension firms: up to £85,000 per person, per firm for SIPP operators, or 100% your claim for other pension providers.
- Debt management firms: up to £85,000 per person, per firm.
- Mortgages: up to £85,000 per person, per firm.
- Insurance: 90-100% of your cover depending on the type of insurance policy.
- Payment protection insurance (PPI): 90% of the total claim.
From the 1st December 2025, FSCS coverage will increase to £120,000.
What is not covered by the FSCS?
The FSCS does not cover:
- Peer-to-peer lending
- Cryptocurrency exchanges
- Some electronic payment services such as PayPal
- Currency transfer firms such as Wise
- Money held on prepaid credit cards
- Christmas or other savings clubs
- ‘Boiler room’ scam investments
- Insurance policies for credit, marine, aviation or transport business
- Reinsurance
- Pension scams
The FSCS also does not cover you if you make an investment and the investment loses value. For example, if you invest in a publicly-traded company or an investment fund, and the value of your investment falls by 20%, you cannot make a claim under the FSCS.
Where can you find more information on the FSCS?
You can find out more about the FSCS at https://www.fscs.org.uk. You can also find more information in this guide here.
How does the FSCS work?
The FSCS will pay out compensation if a regulated financial services firm you’re using goes out of business and you can’t get your money back.
If you have suffered financial losses as a result of the failure of a regulated firm, you can make a claim with the FSCS online. The process is free and quite straightforward. You can also make a claim through a claims management company (CMC). However, a CMC is likely to charge you a handling fee. It’s worth noting that if your bank, building society, or credit union has failed, you don’t need to make a claim. In this scenario, the FSCS will return your money automatically, up to its compensation limit.
To receive compensation from the FSCS, you must be eligible under the scheme’s rules, which are set by the FCA and the PRA. Some points to note here include:
- The FSCS only pays compensation when an authorised firm is unable, or likely to be unable, to pay claims made against it.
- For the FSCS to be able to provide compensation, it must be in connection with a type of regulated activity that was being carried out for you by the authorised firm.
- The FSCS will only pay compensation for financial loss and there are limits as to the amount of compensation it will pay.
- The scheme is mainly designed to assist private individuals, although smaller businesses are also covered.
If your claim is successful, FSCS will pay compensation up to a certain limit. When you accept this compensation, you transfer your legal rights against the firm to the FSCS. This means you can no longer claim against the firm or any other relevant party.
“There has been a significant amount of work done behind the scenes to make our enhanced claims handling model a success, and I’m very proud of what we’ve achieved.”
Sabah Carter, Chief Data, Intelligence and Technology Officer, FSCS
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