FSCS deposit protection

Most of the savings accounts on our marketplace are from UK-based partner banks, and are protected by the Financial Services Compensation Scheme (FSCS). Read on to find out how the FSCS works, and what it covers.

The information provided here is for informational and educational purposes only and does not constitute financial advice. Please consult with a licensed financial adviser or professional before making any financial decisions. Your financial situation is unique, and the information provided may not be suitable for your specific circumstances. We are not liable for any financial decisions or actions you take based on this information.

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, to protect customers in the event that a financial services firm fails. 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.

FSCS protection covers deposits made by individuals into savings accounts up to £85,000 per person, per bank, or up to £170,000 if you have a joint account, provided that the financial institution is regulated by the Financial Conduct Authority (FCA), the Prudential Regulation Authority (PRA), 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.

The FSCS treats banks operating under the same license as one entity. As a result, the £85,000 compensation limit applies to the total deposits you hold with a bank and any of its subsidiaries or intermediaries (including banks operating under different trading names).

As the FSCS covers deposits per person and per bank (rather than per product), any deposit you hold with a bank will count towards the compensation limit. For example, you would reach the limit if you held £25,000 in a current account and £60,000 in savings with the same bank.

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).

You make a claim directly with the FSCS if the bank is within the UK. You may receive compensation up to £85,000 per person, per bank if your chosen bank has failed or can’t meet its financial obligations.

Timescales for the return of your money can vary depending on whether the bank holds your savings in a ‘direct’ or ‘trust’ model. Funds held directly by the bank are usually returned within seven days, whereas funds held under a trust model can take up to three months to be returned. You can find out more about the return of funds under the ‘Deposit Guarantee Scheme’ section of each partner bank here.

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 if 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.

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 could consider spreading your savings across different savings accounts with different banking groups in order to protect your deposits.

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 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.

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

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.

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.

If you want to quickly and easily open savings accounts with FSCS 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.