Are my UK savings protected? FSCS explained

Established by the Government in 2001, the Financial Services Compensation Scheme (FSCS) is used to protect and reimburse consumers and businesses if their financial firm goes out of business.

For example, and most commonly mentioned across our website, if your savings provider goes bust the FSCS will compensate your losses up to the value of £85,000. This doesn’t just cover the capital invested in your savings account, but any interest you’ve accrued too.

However, there’s more to the FSCS than just this scheme. It also has protection programmes in place for insurers, mortgage lenders and investments.

Compensation limits are not payable for each savings account you have with a particular bank, but for the total amount you hold with them. It doesn't matter who your bank is owned by, but rather whether the banking license is shared with other brands in the same group that will affect your compensation entitlement.

For example, in the UK, Halifax and Bank of Scotland are under the same banking license, so you'll only be covered for £85,000 across the two brands under the terms of the Financial Services Compensation Scheme (or £170,000 for joint accounts). But NatWest and Royal Bank of Scotland, although both owned by NatWest, have separate banking licenses, so you would be covered by up to £85,000 for each bank.

While the FSCS is independent from the Government it is subject to the rules and regulations set out by the Bank of England. These rules are set out in the Prudential Regulation Authority (PRA) rulebook and are also followed by the Financial Conduct Authority (FCA).

Therefore, its protection services extend to all banks and building societies which are authorised by the PRA and FCA. There are some exceptions, however, like the National Savings and Investments (NS&I). While it is listed on the FCA’s registry, it is 100% backed by HM Treasury. 

You can check if your bank is covered by the FSCS by using its online eligibility checker. This tool uses the FCA’s financial services register to process your results, so it’s always worth looking at your bank in further detail on the FCA’s website too. If your bank doesn’t appear on the register then you may not be entitled to compensation under FSCS protection.

Now that the UK is no longer part of the European Union (EU), there have been some changes to the FSCS scheme. The changes will mainly be centred on firms which are based in the European Economic Area (EEA). This includes Iceland, Liechtenstein and Norway.

If your money is held in an EEA branch of a UK company then this will no longer be covered by the FSCS. Instead, you may be covered by an EEA deposit guarantee scheme. So, for more information, please contact the firm directly.

Otherwise, other EEA companies which are fully licensed to operate within the UK will continue to receive protection from the FSCS. For example, while Santander is a Spanish-founded bank it continues to operate in the UK and is fully authorised by the FCA. Its financial services are still covered by the FSCS.

Due to the vast number of pensions, it depends on your plan. Other factors play a significant role too, such as where your money is invested and if these investments were made off the back of professional advice. The easiest way to find out the level of cover on your plan is to use the FSCS’s website.

Unregulated investments aren’t covered by the FSCS. These include money in cryptocurrencies and innovative finance ISAs among other investment vehicles.

Otherwise, there are other small areas of finance you should note too. Prepaid holiday cards don’t have FSCS protection, nor do certain e-money companies such as PayPal.

Yes, the FSCS has paid out to individuals and companies in the past. In its 2021/2022 annual results, it said it had paid out £26.5 billion to 6.5 million customers since its inception.

It was most used in 2008, when the financial crisis took place. During that year five financial institutions failed and the FSCS made payments totalling nearly £20 billion to protect consumers.

As for recent years, throughout the COVID-19 pandemic the FSCS has continued to compensate customers, paying out £584 million in each of the years from 2020 to 2021 and 2021 to 2022.

If you’ve got a savings or an investment pot of more than £85,000 there are several steps you can take to ensure your cash is fully backed by the FSCS.

Firstly, you can split your money across several different providers. For example, if you had a pot of £150,000 you could lock £75,000 into a fixed deal with Barclays Bank and the other £75,000 with HSBC. In the unlikely event that both banks fail, all your money plus any interest accrued would be reimbursed by the FSCS.

However, before you commit to two different providers, it makes sense to see if they operate under the same banking licence.

For example, if you decided to take the same £150,000 and split it between Bank of Scotland and Halifax your entire balance wouldn’t be covered as they are just different brands of the same underlying bank.

Use our who owns whom guide to investigate the ownership of registered UK retail banks in more detail.

Secondly, you could split your savings into other accounts protected by other schemes. This could be the NS&I which, as mentioned, is Government-backed. Its Green Bonds, for example, can take a maximum deposit of £100,000 with all of this guaranteed by the Government. This means it can compensate for more of your funds than the FSCS.

Things can get a little trickier if your savings are held in a savings platform.

Savings platforms – such as Raisin UK or Flagstone – are websites that offer savings accounts from selected banks and building societies, in some cases offering exclusive deals that you won’t be able to find anywhere else. They can offer some of the best rates, too, which is why you’ll regularly spot them in our charts.

One benefit of savings platforms is that you’re not tied to a single bank or building society, and can instead choose between several different providers in one place and easily move your money between them. However, the downside is that your FSCS protection isn’t so clear-cut.  

This is because the savings platform itself is only regulated as a payment firm, not a bank – it’s merely a kind of concierge service to help you find the best rates. This means that if it were to fail and it held your money outside of a protected account, you would not get your money back.

However, that isn’t the whole story. Each of the platforms has its own bank account where it keeps your money pending investment in your chosen bank or building society. If your money is in this hub or holding account which is provided by a regulated bank you will still have FSCS protection. You are always protected when your money is held in your chosen account.

This is why it’s essential to know who’s looking after your cash, and whether the necessary protections are in place. Here’s a quick overview of some of the most popular savings platforms and their hub account providers – and as you can see, all the most common ones are FSCS-protected.

The account must be in your name to have suitable protection, and bear in mind overall FSCS limits too. The same £85,000 limit applies whether you’ve gone directly or through a platform, so if you’ve got £50,000 with Paragon Bank and another £50,000 held with Paragon but via a platform, you wouldn’t get the full £100,000 if it were to go bust, only the £85,000 maximum.

Similarly, if you’ve got savings with the hub account provider as well as through a savings platform, make sure that your savings don’t exceed the limit (unless you’re confident that your money won’t be kept in the hub account for long). Most platforms stipulate that any accounts offered by banks based in other European countries are protected by the equivalent guarantee scheme

Just bear in mind that, if things were to go wrong, timelines can be different. If you hold funds directly with a bank that fails, the FSCS should reimburse you within seven days. However, if it’s via a platform, it can take as long as three months to get your money back.

With UK Financial Services Compensation Scheme there is an exception for temporary high balances. Examples might include funds received temporarily due to a dramatic life event, such as:

• Buying or selling a new property
• Equity release funds from your main residence
• Funds from an insurance policy
• Compensation from a personal injury claim or death
• State benefits for disability
• Compensation received for unfair dismissal or wrongful conviction
• Voluntary or compulsory redundancy
• Marriage, civil partnership, divorce or dissolution of civil partnership
• Retirement benefits received at retirement
• Benefits paid on death
• Inheritance
• Monies received from a deceased’s estate held by a personal representative

Temporary high balances are covered for 6 months from the date the money is deposited into the account.  This should give enough time to redistribute the funds across banks to protect the full amount.

Other savings that are not covered by the protection scheme include any funds that are relevant to a conviction for money laundering, or where the account holder's identity has not been verified by the bank or building society under the money laundering regulations.