What is the FSCS?
What you'll learn
Understand what the FSCS is and how it protects your money if a regulated firm fails.
The Financial Services Compensation Scheme (FSCS) is the UK's statutory safety net. If a regulated financial firm fails and cannot pay what it owes you, the FSCS can step in and compensate eligible customers, up to a limit. Protection is automatic and free for money held with UK-authorised firms.
What it covers
The FSCS covers a range of products, each with its own rules and limits.
| Type | What can be covered | Key rule |
|---|---|---|
| Deposits | Cash in banks, building societies, credit unions | Limit applies per banking licence |
| Investments | Claims where a regulated firm fails | Not market losses |
| Pensions | Some claims linked to a failed firm | Rules differ by product |
| Insurance | Certain policies if the insurer fails | Varies by type |
The per banking licence rule
This is the trap most people miss. Several high-street brands can sit on a single banking licence, and the deposit limit applies per licence, not per brand. Spreading large balances across separate licences keeps more of your money inside protected limits.
What it is not
The FSCS protects you from firm failure, not from investment risk. If your fund falls in value, that is the market doing its job, and no compensation applies. There is also a protection limit, so very large balances may not be fully covered in one place.
Limits and the list of brands per licence change over time. Check the current cap and licence groupings on the FSCS website before relying on any figure.
Key takeaways
- The FSCS compensates eligible customers, up to a limit, when a regulated UK firm fails.
- Protection is automatic and free - you do not apply or pay.
- The deposit limit applies per banking licence, so brands sharing a licence share one limit.
- It covers firm failure, not normal market falls; always check the current limit on the FSCS website.
Illustrative only. Assumes a per-licence protection limit and that each bank sits on a separate licence. Spreading money keeps more of it inside the protected limit. Limits and arrangements change - this is not a forecast or advice.
Frequently asked questions
Do I have to apply for FSCS protection?
No. Protection is automatic for eligible deposits held with a UK-authorised firm. You do not sign up or pay for it.
Does the FSCS protect investments too?
It can cover some investment and pension claims where a regulated firm fails, but the rules and limits differ from deposit protection. It does not protect you from normal market falls.
What does per banking licence mean?
Several brands can share one banking licence. The protection limit applies per licence, so money spread across brands on the same licence still counts as one pot.
General information, not financial advice. The value of investments can fall as well as rise, and figures and rules can change; check the current position before acting.