How safe are my savings if my bank or building society goes bust?

The Financial Services Compensation Scheme (FSCS) can pay out compensation to people who end up out of pocket because a bank or other financial services provider goes bust.

It also helps people who lose money because of poor advice from a financial adviser or organisation that has since gone out of business.

The scheme covers several different kinds of financial services. You could get compensation in these situations:

• You lost money in deposit accounts with a bank, building society or credit union if the firm fails. This is as long as you didn’t have more than £85,000 with a single institution. To find out if you have accounts with banks that are part of the same ‘financial institution’, use the free tool on the Which? website
• Your insurance company goes bust. The scheme can pay protected claims and try to arrange for, or help with, the transfer of the insurance business to another company. This is if it’s cost effective and practical.
• Your pension provider goes bust. The scheme only covers pensions regulated by the Financial Conduct Authority. See which schemes are and aren’t covered in Organisations that help to protect pensions.
• A debt management firm that you dealt with goes bust and owed you money.
• You lost money because you got poor financial advice, or your financial services provider committed fraud. In this case, the scheme might cover you if the financial services provider is unable, or likely to be unable, to pay claims against it.

If you have a temporary high balance, you have protection under the Financial Services Compensation Scheme (FSCS) for up to £1 million. This is for up to 6 months from the date the account was first credited.

Cover for temporary high balances is only available to individuals – not companies.

If, for example, you sell your home and so have an unusually high balance in your account.

Your balance might be temporarily protected if your bank goes bust, even if it’s higher than the £85,000 limit.

You’re not covered by the Financial Services Compensation Scheme (FSCS) if:

• The company is still in business. You must complain to them first, and then take your case to the Financial Ombudsman if you’re not satisfied. The scheme does cover future claims against firms still in business.
• The firm wasn’t responsible for your loss. For example, if your loss was caused by an underlying investment going bust.
• The company wasn’t authorised by the Financial Conduct Authority or the Prudential Regulation Authority. You can find out if yours is covered using the Financial Services Register website
• The company was based in the European Economic Area (EEA). All deposit-takers with headquarters in the EEA must sign up to their home country’s deposit compensation scheme. All European countries must have a compensation limit equivalent to €100,000.
• Your claim relates to business that took place before a certain date. This date varies depending on the type of claim. Check dates on the FSCS website
• Your firm is a payments or e-money business. Money held with payments and e-money firms is not protected by the FSCS. For more about payment service providers, see the FCA website

If you think you’ve been sold a product that wasn’t suitable for you and the firm has gone bust, this is mis-selling. And you might be able to claim compensation.

When a bank, building society or credit union goes out of business, the Financial Services Compensation Scheme (FSCS) will automatically pay out depositors with eligible deposits up to £85,000.

Customers of other types of financial services may have to contact the FSCS directly.

There are limits on what the scheme will pay out.

If you have savings above the compensation threshold, you need to be careful how much money you keep with each:

• bank
• credit union
• building society.

Cash you put into UK banks or building societies – that are authorised by the Prudential Regulation Authority – is protected by the Financial Services Compensation Scheme (FSCS).

The FSCS deposit protection limit is £85,000 per authorised firm.

The maximum you would get is still £85,000. This is even if the total of all your different accounts with the same bank added up to more than this.

The level of protection you have will depend on which banks and building societies your accounts are with.

The FSCS will only pay out its maximum of £85,000 per person for each ‘authorised institution’ or banking group.

Some bank brands are owned by a larger bank company. For example, First Direct is owned by HSBC.

So, if you had £80,000 with First Direct and £10,000 with HSBC, you would have a total of £90,000 with HSBC Bank Plc. That means £5,000 wouldn’t be covered by the FSCS.

If you have a joint account, the FSCS deposit protection limit is £170,000.

It’s free to make a claim with the Financial Services Compensation Scheme.

But some companies will offer to help you make a claim and charge you a fee.

This can be as much as a quarter of your compensation plus VAT. So if you got £2,000 back, you could end up paying the company as much as £600.