UK FSCS Protection: What's Covered and How

The Financial Services Compensation Scheme (FSCS) is the UK statutory protection scheme for financial services consumers. The scheme pays out where authorised firms fail, providing protection up to specified limits across deposits, investments, insurance, and pensions.

This guide covers each FSCS category, the limits, the 'per authorisation' detail for deposit protection, and the Temporary High Balance Protection that raises the cap in specific circumstances.

Deposit protection and the GBP 85,000 cap

FSCS deposit protection covers eligible deposits up to GBP 85,000 per person per banking authorisation. Eligible deposits include current accounts, savings accounts, fixed-rate bonds, Cash ISAs, and other deposit-style products held at FCA-authorised UK banks and building societies.

'Per authorisation' is the key detail. Some brands share a single PRA banking authorisation: HSBC and First Direct, Lloyds + Halifax + Bank of Scotland, RBS + NatWest. Deposits across the brands of one authorisation count to the same GBP 85,000 cap.

Joint accounts receive GBP 170,000 (GBP 85,000 per holder). This is on top of each holder's individual single-name protection at the same authorisation, so a couple could have GBP 85,000 each in individual accounts plus GBP 170,000 jointly = GBP 340,000 of protection at a single authorisation.

Worked example: a customer holds GBP 50,000 at HSBC and GBP 50,000 at First Direct. Total deposits GBP 100,000 across two brands; both brands share one authorisation; total protection capped at GBP 85,000. GBP 15,000 of deposits is unprotected. Splitting to a different authorisation (Lloyds, NatWest, Santander) restores full protection.

Temporary High Balance Protection

Temporary High Balance Protection (THBP) raises the deposit cap to GBP 1 million for 6 months after specific qualifying events: house sale, inheritance, divorce or civil partnership dissolution settlement, redundancy, retirement lump sum, insurance payout, lottery or other prize money, personal injury compensation.

The protection is automatic - no application needed. The 6-month window runs from the date the funds are received. After 6 months the standard GBP 85,000 cap applies, so the customer must split larger balances before that point.

The protection applies once per qualifying event per person. A customer receiving an inheritance and later selling a home has two separate THBP windows, each running for 6 months from the respective event.

Worked example: a customer receives GBP 250,000 inheritance and holds it at a single bank while planning what to do. Standard cap GBP 85,000 leaves GBP 165,000 unprotected. THBP raises the cap to GBP 1 million for 6 months, covering the full GBP 250,000. After 6 months, the customer splits the balance across two or three authorisations to restore full standard protection.

Investment protection

FSCS investment protection covers eligible investments up to GBP 85,000 per person per firm. The scheme pays out where an authorised investment firm fails. Covered: ISAs, SIPPs, GIAs (General Investment Accounts) held at FCA-authorised platforms.

Investment protection covers loss caused by firm failure, NOT loss caused by investment performance. A platform going bust and being unable to return assets to the customer is covered up to GBP 85,000. An investment dropping in value due to market movements is not covered - that's the risk of investing.

Where investments are held in nominee accounts (the platform holds investments on behalf of customers in a separate legal structure), the underlying investments typically remain the customer's property even if the platform fails. The FSCS cover applies to losses arising from the platform's failure beyond the nominee assets.

Worked example: a SIPP holder with GBP 200,000 in funds at a platform that goes bust. The funds (held in nominee accounts) remain the customer's property and are transferred to a new platform. Where the platform fail caused additional losses (e.g. unable to settle transactions before failure, fraud), FSCS cover up to GBP 85,000 applies to those additional losses.

Insurance protection

FSCS insurance protection covers eligible policies where the insurer fails. Compulsory insurance (motor third-party liability, employers' liability) is covered at 100% of valid claims with no upper limit. General insurance (home, travel, other) is covered at 90% of valid claims with no upper limit.

Long-term insurance (life, pensions, critical illness) is covered at 100% of valid claims with no upper limit. The cover applies to insurance benefits owed; the underlying premiums paid are not separately compensated.

Where an insurer fails mid-claim, FSCS arranges payment of the legitimate claim under the original policy terms. Where an insurer fails before any claim, FSCS arranges policy transfer to another insurer or refund of unused premium.

Worked example: a household has home insurance with an insurer that fails. The FSCS arranges policy transfer to another insurer; the household continues to be insured. If a claim arose before the failure was resolved, FSCS pays the claim at 90% of the valid amount under the original policy. The 10% uncovered slice may be claimable through other routes (the failing insurer's estate, etc.).

Pensions and the wider protection landscape

Workplace pensions: protected through the Pension Protection Fund (PPF) for defined benefit schemes. The PPF pays scheme members at typically 90-100% of expected benefits when an employer fails. Defined contribution pensions are protected through FSCS investment cover at GBP 85,000.

Personal pensions and SIPPs: covered by FSCS investment protection at GBP 85,000 per person per firm. The underlying assets in the pension are typically held in nominee or trust structures providing additional security.

NS&I products: outside the FSCS framework. NS&I is a government department within HM Treasury with effectively 100% protection by Treasury backing. Premium Bonds up to GBP 50,000 per person, NS&I Income Bonds up to GBP 1 million, NS&I Direct Saver up to GBP 2 million all provide cap-free Treasury protection.

Practical action: for substantial cash balances above GBP 85,000, splitting across truly different banking authorisations preserves full FSCS protection. For very large balances, NS&I products provide cap-free Treasury backing as an alternative. The combination of FSCS-protected banking and NS&I covers most household cash management needs.

When FSCS pays out and the process

FSCS pays out when an authorised firm fails (the PRA or FCA declares the firm to be in default). The default trigger initiates the FSCS process: identifying eligible claimants, calculating eligible amounts, and paying compensation.

For bank failures, the FSCS typically arranges deposit return within 7 days for most balances. The FSCS has worked with the PRA and Bank of England to ensure rapid payout in recent bank failures (Northern Rock, Bradford & Bingley historically). For most customers, the 7-day target gives quick access to funds.

For larger or more complex situations, the FSCS may transfer accounts to another bank rather than paying compensation. The customer's account is transferred with continuity of service; no payout is needed. The Bank of England's Resolution regime supports these transfers.

Practical action: customers don't typically need to apply for FSCS compensation. The scheme identifies eligible claimants from the failed firm's records and processes payouts automatically. Where the customer believes they should be eligible but are not contacted, the FSCS website provides a 'check if I'm eligible' tool.

Banking authorisations and brand combinations

The 'per authorisation' detail in FSCS protection trips up some savers with substantial balances. Some brand combinations share authorisations:

• HSBC + First Direct = one authorisation
• Lloyds Bank + Halifax + Bank of Scotland = one authorisation
• RBS + NatWest = one authorisation
• Santander UK = own authorisation
• Barclays = own authorisation
• Nationwide BS = own authorisation
• Most challenger banks = own authorisation each

The FSCS website at fscs.org.uk has a 'check my bank' tool showing which brands share authorisations. For substantial savers, this tool is essential for planning FSCS-cap strategy across brands.

Practical action: spreading deposits across truly separate authorisations preserves protection. Checking the FSCS tool before opening multiple accounts ensures the diversification is genuine. Multiple accounts at brands sharing one authorisation provide no additional FSCS protection.

Frequently asked questions

How much money is protected if my UK bank fails?

Up to GBP 85,000 per person per banking authorisation. Joint accounts get GBP 170,000. Some brands share authorisations (HSBC + First Direct; Lloyds + Halifax + Bank of Scotland; RBS + NatWest) so deposits across the brands count to the same cap. Temporary High Balance Protection raises the cap to GBP 1 million for 6 months after qualifying life events. NS&I products are Treasury-backed outside FSCS framework.

What's Temporary High Balance Protection?

Increased FSCS cap of GBP 1 million for 6 months after specific qualifying events: house sale, inheritance, divorce settlement, redundancy, retirement lump sum, insurance payout, personal injury compensation. The protection is automatic - no application needed. Runs for 6 months from the date the funds are received. After 6 months standard cap applies so larger balances need to be split.

Does FSCS cover investment losses?

Only losses caused by firm failure, not by investment performance. A platform going bust and being unable to return assets to customers is covered up to GBP 85,000 per person per firm. An investment dropping in value due to market movements is not covered - that's the inherent risk of investing. The protection applies to platform failure, not to choices about what to invest in.

Are pensions FSCS-protected?

Defined contribution pensions and SIPPs are covered by FSCS investment protection at GBP 85,000 per person per firm. Defined benefit (final salary) pensions are protected by the Pension Protection Fund (PPF), typically paying 90-100% of expected benefits when an employer fails. The two schemes work alongside each other to cover different pension types.

Should I spread my money across banks?

Yes if total deposits exceed GBP 85,000 at any one authorisation. The FSCS cap applies per authorisation, so spreading across truly different banking groups preserves full protection. Joint accounts double the cap. For very large balances, NS&I products provide cap-free Treasury protection as an alternative. Most households below GBP 100,000 of cash don't need to spread; above that level the FSCS strategy matters.