The Financial Services Compensation Scheme (FSCS) offers protection to consumers in the event that an authorised financial services firm has gone bust. This means that, as long as your provider is authorised by the Financial Services Authority (FSA), you could be compensated for any financial loss for money which you've invested or saved should the company enter into administration or liquidation. To check whether a provider is FSA-authorised, search the FSA's register.
The FSCS is completely impartial and independent of the government and the financial industry. It's been running since 2001, although it still handles claims for compensation from before that time. The FSCS is a last resort, paying compensation to consumers only if a financial firm is unable to do so itself, either because it has stopped trading or gone into default.
If your financial provider goes under, you should receive a letter from the administrators informing you of the situation. But if a company just 'disappears' and you are left worrying about where your money has gone, then check the FSCS website. You can search the FSCS database to find out if a provider has already been declared in default.
There is no charge for using the FSCS's services - it is completely free for consumers and is there to offer you peace of mind and protection.
There are three main areas for which the FSCS offers compensation: savings, investments and insurance. To find out more about what the FSCS offers compensation for in more detail, click here: fscs.org.uk/what-we-cover
While the FSCS offers compensation for financial loss, there are some limits on how much money you can claim for. For savings, you can reclaim up to 100% of the first £85,000 you hold with each provider which has its own banking licence (read more about banking licences here: LINK to the advertorial).
For investments, you can claim up to £50,000, depending on when the company went into administration (read about FSCS investment limits here).
Compulsory insurance (that is, insurance which you are required to have by law, such as third party motor insurance) is fully compensated. Non-compulsory insurance has its own limits, meaning FSCS can pay up to 90% of the value of your claim (there's no maximum amount). To find out how much compensation you're entitled to for insurance from an insurance provider which went under before 2010, go here: fscs.org.uk/what-we-cover/eligibility-rules/compensation-limits/insurance-limits
The way to claim compensation varies, depending on what you are claiming for. But typically, the FSCS will contact you once a provider is declared in default. You'll receive an application form for compensation, which you should send back in the post as soon as you can. The sooner the FSCS has your form, the quicker it will be able to review your claim. Although the FSCS can't guarantee how long it will take to receive your compensation cheque, it does aim to process claims within six months of a firm going into default. But it pays out much more quickly for bank, building society or credit union failures. The FSCS will seek to pay compensation in the vast majority of cases within seven days of a deposit taker failing. It will aim to pay any remaining claims which are likely to be more complex within 20 working days.
If you are unsure about whether you are entitled to receive compensation, call the FSCS directly on 020 7741 4100 or visit fscs.org.uk for more information.
