FSCS deposit protection

How does it work and what does it cover?

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Most of the savings accounts in our marketplace are from UK-based partner banks, meaning they’re protected by the Financial Services Compensation Scheme (FSCS). Because of this, you can rest assured that any savings products you open through the Raisin UK savings marketplace will be protected up to the statutory limit of £85,000 per person, per institution. Read on to find out how the FSCS works and what it covers. You’ll also learn more about its European equivalent, the DGS.

Key takeaways
  • FSCS protection: The FSCS is a deposit guarantee scheme that protects money you have in a UK-regulated bank (up to set limits) and pays compensation in the event that the institution fails

  • FSCS limits: Under the scheme, if your bank collapses the FSCS pays compensation up to the limit of £85,000 per person, per authorised financial institution/banking group

  • European protection: Deposits in European banks are protected under a similar initiative, known as the European Deposit Guarantee Scheme

What is the FSCS?

Set up in 2001, the Financial Services Compensation Scheme, or FSCS, is the deposit guarantee scheme for the UK. It is an independent body created by the British government and funded by the financial services industry, created to protect customers of financial services firms that have failed. This means that the FSCS will pay compensation to you if the bank, building society, insurer or credit union you’ve been saving with has collapsed and can’t pay out the claims made against it. FSCS protection covers savings deposits, pensions, investments, insurance policies, and home finance.

What does the FSCS cover?

FSCS protection covers deposits made by individuals into savings accounts up to £85,000 per person, per banking group, or up to £170,000 if you have a joint account, provided that the financial institution is regulated by the Financial Conduct Authority, the Prudential Regulation Authority, or both. FSCS protection is available for deposits with most UK high-street and online banks. It covers savings deposits, pensions, investments, insurance policies and home finance. You could be temporarily covered for up to £1 million in certain circumstances, for example; if you recently sold a property or inherited a large sum of money

At Raisin UK, we will always let you know which banking group a savings account is being offered by, so you can make informed decisions as to which savings accounts are right for you.

What does the FSCS not cover?

  • The FSCS treats different banks who are part of the same banking group as one bank, so the compensation limit applies to the total amount you have in all accounts within the group. The FSCS will pay compensation up to the limit of £85,000 per person, per authorised financial institution/banking group, so should you have multiple deposits within a banking group, you will only be protected up to this limit.

  • The interest rate on your savings account could mean you exceed the compensation limit by taking you above £85,000

  • Some savings accounts or products aren’t protected by the FSCS – you should check with each financial service provider before depositing any money

  • A growing number of banks operating in the UK are based internationally. The FSCS may still cover them, but again, you should check before depositing your money (see below for more on the EU equivalent of the FSCS)

  • The FSCS does not protect money held in digital wallets or e-wallets

What counts as a financial institution for the purpose of FSCS protection?

A financial institution is any company that deals with financial transactions, but when it comes to defining a financial institution in terms of deposit protection, the definition gets a little complex. That’s because many banks have been through a merger or have been taken over by another banking group. 

This makes it harder for you to determine which banking group or financial institution the bank you are dealing with is in. It’s important to know this as the FSCS will only cover your deposit up to £85,000 per banking group. You can find out which banking group or financial institution a bank belongs to through the Financial Conduct Authority (FCA).

How does FSCS deposit protection work?

If you think you have a claim from a financial firm that’s failed, you can make your claim directly with the FSCS if it’s within the UK. If it is found that your financial firm has failed, then the FSCS should automatically return your money, up to £85,000 per person, per banking group.

In terms of how long it takes to make a claim against a failed bank or building society, timescales for the return of your money can vary between different banks and banking groups, depending on if they hold your savings in a ‘direct’ or ‘trust’ model. Funds held directly by the bank are usually returned within 2-3 days. Funds held under a trust model can take up to three months to be returned, but in most cases will be returned sooner than this. You can find out more about the return of funds under the ‘Deposit Guarantee Scheme’ section of each partner bank here.

How do I make a claim with the FSCS?

If the bank, building society, or credit union that you hold your savings account with fails and you are entitled to compensation, you don’t need to make a claim – the funds (up to the eligibility limit) will be reimbursed to you automatically.

You can check you are eligible to claim on the FSCS website, where you will need to complete a basic form about your provider and the product or policy. The FSCS will quickly give you results that tell you whether you’re eligible to make a claim or not.

What happens if I surpass the £85,000 FSCS protection limit?

The FSCS protects certain temporary high balances up to £1 million for 6 months from when the amount was first deposited, for example if you have sold a property or had a compensation payout.

Otherwise, any additional funds above £85,000 would not be protected by the scheme, and this includes interest accrued on a savings account that would take your total balance via Raisin UK above £85,000. For example, if you deposited £85,000 in a savings account, your interest earned would take you above the limit.

If you want to deposit more than £85,000 into a savings account, you should spread your savings across different savings accounts with different banking groups in order to protect your deposits.

How can the FSCS afford to pay out compensation?

The FSCS isn’t sitting on a pile of money they might need in the event of a financial fallout. Instead, it operates a ‘compulsory levy’ on banks, insurers and others signed up to the scheme as and when it needs the money.

This ‘compulsory levy’ allows the FSCS to pull cash from more than just the affected sector. For example, if an insurer collapses, there is a chain of other institutions who must contribute, such as other insurers and banks. In theory, the FSCS has the legal power to call in funds from major financial institutions to cover the compensation needed should a financial institution fail, but there is a £4 billion cap on how much the FSCS can levy.

If this weren’t enough, the Government would lend the money (i.e. taxpayers’ money), and then try to get it back from the insolvent bank’s assets and by putting a levy on the banks for years to pay it back, which happened during the 2008 crisis, with the Government only just selling the last of its shares in Lloyds in 2017.

Can I claim FSCS compensation for somebody who has died?

Yes – but you will need to provide additional documents as set out by the FSCS.

Are there any other deposit protection schemes available?

Yes, other deposit protection schemes are available. If you’ve opened a savings account with a partner bank registered in Europe, rest assured that you’ll be covered by the European Deposit Guarantee Scheme (DGS). It works in a similar way to the UK’s FSCS, and protects up to €100,000 (or the equivalent amount in a European country’s local currency) if the financial institution fails. This amount is guaranteed, irrespective of the financial means of any country-specific DGS.

A separate scheme applies if the bank is registered in Sweden. The Swedish Deposit Protection Scheme, which is an independent body set up by the Riksgälden, also reimburses you if the institution in which you have money collapses. The Raisin UK partner bank covered by the Swedish Deposit Protection Scheme is HoistSavings. It protects deposits up to a total of SEK 1 050 000 per person.

If you’re not sure which scheme deposits will be protected under, simply look for the FSCS or European DGS logo next to the name of the bank or savings account you’re interested in.

Opening a deposit-protected savings account

If you want to quickly and easily open savings accounts with FSCS or DGS deposit protection,  register for a Raisin UK Account and log in to apply. Opening an account is free and simple, and once you’ve been approved, all you need to do is make a deposit and watch your savings grow.