There are limits to the protection FSCS can provide.
To be able to claim compensation with us you must be eligible under the FSCS compensation rules, which are set by the UK financial services regulators: the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA). These rules tell us which types of claim are eligible for FSCS compensation.
The main points are:
- We can pay compensation only when an authorised firm is unable, or likely to be unable, to pay claims made against it. We describe this as being in default. We will carry out an investigation to establish the financial position of the firm.
- We can pay compensation only if a claim is eligible under our rules.
- FSCS can pay compensation only for financial loss and there are limits to the amounts of compensation we can pay.
- The Scheme was set up mainly to assist private individuals, although smaller businesses are also covered.
- Larger businesses are generally excluded, although there are some exceptions to this for deposit and insurance claims.
- See also the section below on Regulated Activities.
- When FSCS is triggered
On 26 March 2021, FCA issued a statement announcing an update to the methodology used to calculate redress due in cases where it has been deemed the advice was unsuitable for defined benefit pension transfer. The changes do not impact any defined contribution pension transfer claims.
- The update in methodology applies to the application of the Consumer Price Index (CPI) in calculating pension increases when determining if a loss has been incurred as a result of transferring pension benefits.
- We are currently liaising with our pension calculation software provider to implement these changes.
- In line with the FCA announcement, we will be re-visiting affected claims which were calculated from 1 January 2021. If your claim is one of those affected, you will receive a decision letter with an uplifted compensation award (if applicable) in due course. The FCA has confirmed that there is no requirement to re-visit claims that were calculated prior to 1 January 2021.
- No completion date has been set to re-visit these claims.
- Claims that have already received the maximum compensation award will not be re-visited.
For more information, please visit the FCA website.
Dates regarding historical claims
- For investment claims, if a claim relates to business conducted before 28 August 1988, we are unlikely to be able to help. This is the date when these activities were first protected by an investor compensation scheme in the UK.
- For mortgage advice and arranging, we will only be able to help if a claim relates to business conducted on or after 31 October 2004. These activities were not protected by FSCS before this date.
- For claims relating to insurance intermediaries, we will only be able to help if a claim relates to business conducted on or after 14 January 2005. These activities were not protected by FSCS before this date. If a claim relates to travel insurance where the policy is sold alongside a holiday or other related travel, we will only be able to help if the claim relates to business conducted on or after 1 January 2009.
FSCS can only consider claims against firms that were authorised by a UK regulator at the time the advice was given. The UK's regulators are the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA).
Claims before 1 December 2001:
- Slightly different rules apply for claims against an insurer or a bank that was insolvent before FSCS became operational (1 December 2001), or for claims against an investment firm that was declared in default before FSCS became operational. These claims are covered by the rules governing the separate compensation schemes that existed before that date, although we will handle the claim. FSCS became the single compensation scheme on 1 December 2001, replacing former schemes.
For FSCS to be able to protect a claim, it must be in connection with a type of regulated activity that was being carried out for you by the authorised firm. The government decides which activities are regulated by designating these in the Regulated Activities Order. Examples include advising, arranging, or managing certain types of investments.
It follows that not all activities carried out by an authorised firm will themselves be "regulated activities". It is not always easy to determine if a regulated activity is being carried out, as there are many exceptions and it is very fact dependent. You can ask your particular firm whether the work they are carrying out for you constitutes a regulated activity.