When is FSCS cover triggered?

Deposits

FSCS is triggered when an authorised deposit taker (such as a bank, building society or credit union) is unable, or likely to be unable, to repay its depositors. Joint account holders are each entitled to claim compensation.

General insurance

Policyholder protection is triggered if an authorised insurer is unable, or likely to be unable, to meet claims against it, for example if it has been placed in provisional liquidation or administration.

Long-term insurance (e.g. pensions and life assurance)

Policyholder protection is triggered if an authorised insurer is unable, or likely to be unable, to meet claims against it, for example if it has been placed in provisional liquidation or administration.

General insurance advice and arranging

FSCS will safeguard policyholders if an authorised firm is unable, or likely to be unable, to pay claims against it, for example if it has been placed in provisional liquidation or administration. For example, FSCS may provide:

  • a return of premium or compensation in respect of an outstanding claim;

  • compensation in respect of insufficient cover, or if the customer is not told about a relevant exclusion in the contract, which causes the insurer to reject the claim;

  • compensation in the event of fraud, for example, if premiums are inflated;

  • compensation if a secondary intermediary becomes insolvent before passing premiums to an insurer.

Investments

FSCS provides protection if an authorised investment firm is unable to pay claims against it. For example:

  • for loss arising from bad investment advice, poor investment management or misrepresentation;

  • when an authorised investment firm goes out of business and cannot return investments or money.

Investments covered include: stocks and shares; unit trusts; futures and options; personal pension plans and long-term investments such as mortgage endowments.

Home finance (e.g. mortgage) advice and arranging

The main area of mortgage advice that may give rise to a claim falling within the remit of FSCS relates to the suitability of that advice for the customer's circumstances at the time. For example:

  • if the customer is not advised about the different types of mortgage available and lost money as a result;

  • if the specific details of the mortgage chosen are incorrect and the customer lost money as a result;

  • if the customer is advised to switch mortgages but was not given an adequate explanation of why a switch should be made, and lost money as a result;

  • if the customer is advised to take out a lifetime mortgage that was unsuitable for his/her circumstances at the time and lost money as a result.

Debt management

A debt management claim would need to meet all of the following criteria:

  • the firm must have failed on or after 1 April 2018;
  • the firm must be an FCA-authorised firm that holds client money;
  • the money must have been received or held by the firm through a UK branch in connection with the regulated activities of debt counselling or debt adjusting;
  • the client money reconciliation process must show that there is a shortfall in the amount of client money the firm held for you; and
  • the firm (or its principals) must no longer be able to meet claims for compensation
  • the customer must be eligible under FSCS’s rules.

Whilst money held by a firm under a Debt Management Plan may therefore be covered, FSCS protection does not extend to:

  • Money paid by a debtor under an Individual Voluntary Arrangement (“IVAs”) arranged by insolvency practitioners (which are not regulated by the FCA); or
  • Debt advice.

FSCS can pay compensation only for financial loss.

Make a claim

 

The FCA

The Financial Conduct Authority website includes a searchable database of all firms authorised and regulated by the FCA and the Prudential Regulation Authority (PRA).

The FOS

The Financial Ombudsman Service is the official independent expert in settling complaints between consumers and financial businesses