How FSCS Protection Works: Deposits, Investments, Pensions and Insurance

FSCS covers different products at different limits

There is no single FSCS compensation figure. The amount you can claim depends entirely on the type of financial product you hold and the circumstances of the firm's failure. Protection limits range from 85,000 pounds for investments to 120,000 pounds for deposits, with some insurance and pension products covered at 100% of the claim with no upper limit.

The Financial Services Compensation Scheme (FSCS) is the UK's statutory compensation fund for customers of authorised financial services firms that fail. It was established under the Financial Services and Markets Act 2000 and is funded by levies on authorised firms. When a firm becomes insolvent or is declared in default, the FSCS steps in to pay compensation to eligible claimants.

The table below sets out the main protection limits for each product category. The limits apply per person, per firm, meaning that if you hold multiple accounts with the same failed firm, they are aggregated for the purpose of calculating compensation. However, if you hold accounts with different authorised firms, each firm is treated separately for compensation purposes.

It is important to understand that the FSCS protects against the failure of a financial services firm, not against poor investment performance or market fluctuations. If an investment loses value because of market conditions, the FSCS will not compensate for that loss. The scheme only steps in when the firm itself becomes insolvent and is unable to return your money or assets.

The protection limit is calculated per person, per firm. Joint accounts are treated differently: each account holder is entitled to claim up to the full limit for their share of the account. For example, a joint savings account with a balance of 240,000 pounds would be fully protected if each holder's share is 120,000 pounds or less.

Deposits and savings

Bank and savings deposits are protected up to 120,000 pounds per person, per firm, following an increase that took effect on 1 December 2025. This higher limit replaced the previous 85,000 pound threshold and applies to all eligible deposit accounts held with authorised banks, building societies and credit unions.

The deposit protection limit covers a wide range of accounts, including current accounts, savings accounts, cash ISAs, and fixed-term deposits. The limit applies to the total amount you hold with a single firm, not to each individual account. If you have multiple accounts with the same bank, they are added together for the purpose of calculating your compensation.

Temporary high balances receive additional protection. If you have a deposit balance that exceeds 120,000 pounds because of a one-off event, such as the sale of a property, an inheritance, or a redundancy payment, you may be protected up to 1.4 million pounds for up to six months from the date the funds were deposited. This temporary high balance protection applies to funds arising from specified life events and requires that the balance was previously below the normal limit.

The FSCS aims to pay compensation on deposits within seven working days of a firm being declared in default. In practice, most eligible claimants receive their money within this timeframe. The scheme covers deposits held in sterling and other currencies, although compensation is paid in pounds sterling.

For the full deposit rules and guidance on how to spread savings across different firms to maximise protection, see the FSCS protection limit guide. It is worth noting that the 120,000 pound limit applies per person, per firm, so holding deposits with multiple authorised firms can increase your overall protection.

Investments

Investments are protected up to 85,000 pounds per person, per firm. This protection applies when an authorised investment firm fails and is unable to return your assets or money. It does not protect against falls in the market value of your investments, which remain your responsibility as an investor.

The investment protection covers a range of products, including stocks and shares ISAs, general investment accounts, and cash held within a SIPP. If an authorised investment platform or fund manager becomes insolvent, the FSCS can compensate you for the loss of your investments up to the 85,000 pound limit.

However, a crucial distinction exists between the failure of the firm and the performance of the investments themselves. If your investments lose value because of market movements, poor fund performance, or changes in economic conditions, the FSCS will not compensate you. The scheme only covers losses arising from the firm's failure, such as misappropriation of assets, fraud, or the firm's inability to return your holdings.

Investments held in segregated nominee accounts usually remain the client's property even if the platform fails. In these cases, the assets are held separately from the firm's own assets and should be returned to you in full, regardless of the 85,000 pound limit. The FSCS protection applies where assets cannot be returned, for example because they were not properly segregated or were lost due to the firm's actions.

When claiming for investment losses, you must demonstrate that the firm has been declared in default by the FSCS. The scheme will then assess your claim and pay compensation up to the applicable limit. Claims for investment losses are typically paid within three months of the firm being declared in default.

Pensions

Pension protection under the FSCS depends on the type of pension arrangement and which firm has failed. Annuities and insured personal pensions from a failed insurer are covered at 100% of the claim with no upper limit, while failure of a SIPP operator is covered up to 85,000 pounds per person, per firm.

For defined contribution pensions held with an insurance company, such as personal pensions and stakeholder pensions, the FSCS provides 100% protection with no upper limit if the insurer fails. This means that the full value of your pension pot is protected, regardless of its size. This protection applies to the accumulated fund value at the point of the insurer's failure.

Annuities are also covered at 100% with no upper limit. If you have purchased an annuity from an insurer that subsequently fails, the FSCS will ensure that your annuity payments continue in full. This protection is particularly important for retirees who rely on annuity income for their living expenses.

For Self-Invested Personal Pensions (SIPPs), the protection depends on the nature of the failure. If the SIPP operator fails, your cash and investments held within the SIPP are protected up to 85,000 pounds per person, per firm. However, if the underlying investments are held in segregated nominee accounts, they may remain your property and be returned in full.

The cover depends on how the pension is structured and who has failed. If an employer's defined benefit pension scheme fails, the Pension Protection Fund, not the FSCS, provides protection. The FSCS only covers personal pensions and SIPPs where the provider or operator is an authorised firm that has been declared in default.

Insurance

Insurance protection under the FSCS varies by policy type. General insurance policies such as home and travel cover are protected at 90% of the claim with no upper limit, while compulsory insurance such as motor third-party cover and long-term insurance such as life cover are protected at 100% with no upper limit.

General insurance includes policies such as home insurance, travel insurance, pet insurance, and private medical insurance. If an insurer fails, the FSCS will pay 90% of the value of your claim, with no upper limit on the amount. This means that for a valid claim of 10,000 pounds, you would receive 9,000 pounds from the FSCS.

Compulsory insurance, which is required by law, is protected at 100% of the claim with no upper limit. The most common example is motor third-party insurance, which is legally required for all drivers in the UK. If your motor insurer fails, the FSCS will pay your claim in full, ensuring that you are not left out of pocket.

Long-term insurance, such as life insurance, critical illness cover, and income protection, is also protected at 100% with no upper limit. This protection applies to the benefits payable under the policy, including death benefits and ongoing income payments. If a life insurer fails, policyholders continue to receive their contractual benefits in full.

Insurance cover applies when the insurer fails. The FSCS does not cover disputes about policy terms, claims that are rejected by the insurer for valid reasons, or losses arising from poor advice about insurance products. These matters fall outside the scope of the compensation scheme.

What the FSCS does not cover

The FSCS has clear boundaries. It does not cover falls in the market value of investments, e-money and payment firms are not covered, and cryptoassets and unauthorised firms are outside FSCS protection entirely. Understanding these exclusions is essential for anyone considering where to place their money.

Market value losses are the most common misunderstanding about FSCS protection. If you invest in shares, funds, or other assets and their value falls, the FSCS will not compensate you. Investment risk is borne by the investor, and the scheme only protects against the failure of the firm holding your assets, not the performance of those assets.

E-money and payment firms are not covered by the FSCS. This includes firms that issue electronic money, such as prepaid cards and digital wallets, and firms that provide payment services. Instead, customer funds held by these firms are safeguarded separately under the Electronic Money Regulations and Payment Services Regulations. Safeguarding requires firms to hold customer funds in segregated accounts, but this does not provide the same level of protection as FSCS cover.

Cryptoassets are entirely outside FSCS protection. The FSCS does not cover losses arising from the failure of crypto exchanges, custodians, or other crypto-related firms. Cryptoassets are not regulated as financial products by the Financial Conduct Authority, and any investment in them carries a high risk of loss with no compensation available.

Unauthorised firms are also outside FSCS protection. If you deal with a firm that is not authorised by the Financial Conduct Authority or the Prudential Regulation Authority, the FSCS cannot compensate you. Always check the Financial Services Register before investing or depositing money with any firm to confirm that it is authorised and that your products are eligible for FSCS protection.

Frequently asked questions

What does the FSCS cover?

The FSCS covers different financial products at different limits. Deposits are protected up to 120,000 pounds, investments up to 85,000 pounds, and insurance up to 90% or 100% of a claim depending on the type.

How much are investments protected?

Investments are protected up to 85,000 pounds per person, per firm. This covers the failure of the firm, not falls in the market value of the investments.

Are pensions covered by the FSCS?

Annuities and insured personal pensions from a failed insurer are covered at 100% of the claim with no upper limit. Failure of a SIPP operator is covered up to 85,000 pounds per person, per firm.

Is insurance covered by the FSCS?

General insurance such as home and travel cover is protected at 90% of the claim with no upper limit. Compulsory insurance such as motor third-party cover, and long-term insurance such as life cover, are protected at 100% with no upper limit.

What is not covered by the FSCS?

The FSCS does not cover falls in investment value, e-money and payment firms, cryptoassets, and unauthorised firms. Customer funds with e-money firms are safeguarded separately instead.