UK FSCS Compensation Guide (£85,000 Protection Limit)

What Is FSCS

The Financial Services Compensation Scheme is an independent body set up by the UK government under the Financial Services and Markets Act 2000. It is funded by levies on FCA-authorised financial firms. If a firm fails and cannot return your money, the FSCS steps in to compensate you. For deposits (cash in bank accounts, building society accounts, and credit union accounts), the protection covers 100% of the first £85,000 per person per FCA-authorised institution. For investments, the FSCS covers 100% of the first £85,000 per person per firm.

The £85,000 limit is aligned with EU deposit protection schemes (it is the equivalent of €100,000). The scheme applies to all UK banks, building societies, and credit unions authorised by the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA). If you have money with a UK branch of an EEA bank, the protection may be provided by the home state scheme rather than the FSCS — check with your bank. The FSCS does not cover fraud or poor advice on investments beyond the £85,000 limit.

Protection Limit

The £85,000 limit applies per person per FCA-authorised institution — not per account. If you have a current account, savings account, and cash ISA with the same bank, the total of all three accounts is covered up to £85,000. The key distinction is between "institution" and "brand" — multiple brands under the same banking licence count as one institution. For example, HSBC and First Direct share a banking licence — you are protected for a combined total of £85,000 across both, not £85,000 each.

To maximise protection, spread your cash across different banking groups. Each banking group has its own FCA licence: Barclays is one group, Lloyds Banking Group (including Lloyds, Halifax, Bank of Scotland) is another, NatWest Group (including NatWest, Royal Bank of Scotland, Ulster Bank) is another, Santander is separate, Nationwide Building Society is separate, HSBC Group (including HSBC and First Direct) is another. A full list of banking groups and their brands is available at FSCS.org.

How Protection Works per Institution

Here is how the £85,000 protection applies to major UK banking groups in 2026: HSBC + First Direct = one licence, £85k total. Barclays = separate licence, £85k. Lloyds + Halifax + Bank of Scotland = one licence, £85k total. NatWest + RBS + Ulster Bank = one licence, £85k total. Santander = separate licence, £85k. Nationwide = separate licence, £85k. Virgin Money = separate licence, £85k. Challenger banks like Monzo, Starling, Revolut have their own licences — check the FSCS register at FSCS.org to confirm.

Cash ISAs count towards the same £85,000 limit per institution — so a £50,000 easy-access account and a £50,000 cash ISA with the same bank would be covered for only £85,000 total, not £100,000. To fully protect both accounts, hold them at different banking groups. Fixed-rate bonds and notice accounts are also covered within the same £85,000 limit per institution. The protection applies per person — so a joint account provides £85,000 coverage for each account holder (see below).

Joint Accounts

Joint accounts receive separate protection: each account holder is protected up to £85,000 for their share of the joint account. This means a joint account held by two people at a single institution is protected for up to £170,000 (£85,000 per person). If you also have a sole account with the same institution, that is protected separately up to £85,000. Joint accounts with more than two people get £85,000 per person (up to a maximum of four named account holders under standard terms).

For married couples, this means you can protect substantial sums: £85,000 sole account + £170,000 joint account = £255,000 at a single institution for a couple. Across multiple banking groups, a couple can protect much larger amounts. For example, across 5 different banking groups, a couple could protect £255,000 × 5 = £1,275,000. This is particularly relevant for older savers or those who have recently sold a property and need to hold cash temporarily.

Investment Compensation

The FSCS also protects investments — including stocks, shares, funds, ETFs, and SIPPs — if the firm holding your investments fails (for example, a stockbroker goes into administration). The limit is 100% of the first £85,000 per person per firm. This covers the value of your investments held by the firm, not the investment performance (if your investments fall in value, that is not FSCS-protected — the protection is against the firm failing, not market loss).

The FSCS covers SIPP assets if the SIPP provider fails — your pension investments are protected up to £85,000. However, claims can be complex, and the time to payout may be longer than for cash deposits. The FSCS also covers claims for bad financial advice (if the advisor is authorised and has gone out of business), with the same £85,000 limit. This applies to pension transfer advice, investment advice, and mortgage advice. Claims for bad advice must be made within 6 years of the advice or 3 years of discovering the issue.

Temporary High Balance Protection

If you have a temporarily high cash balance — for example from selling a house, receiving an inheritance, a divorce settlement, or an insurance payout — the FSCS provides enhanced protection of up to £1 million for 6 months from the date the funds are received. This applies per person per institution, separate from the standard £85,000 limit. You need to be able to provide evidence of the source of the funds and the date they were received.

The temporary high balance protection applies to specific life events: sale of a main residence, inheritance received, divorce settlement or dissolution of a civil partnership, redundancy payment, insurance payout (including critical illness, income protection, and life insurance), personal injury compensation, pension lump sum (including tax-free cash), and proceeds of a claim against a professional. If these funds are held for longer than 6 months, the standard £85,000 protection applies. If the firm fails during the 6-month period, you can claim up to £1 million from the FSCS — provided you have evidence of the triggering event.

FSCS and Fintech/Challenger Banks

The rise of digital-only banks (fintechs and challenger banks) has created some confusion about FSCS protection. Monzo, Starling, Revolut, and similar digital banks are regulated by the FCA and PRA in the same way as traditional banks, and deposits are protected up to £85,000 through the FSCS. However, some fintechs operate under an "e-money" licence rather than a full banking licence — in that case, your money is not FSCS-protected but is "safeguarded" in a separate client account held with a regulated bank. Safeguarding means the fintech cannot use your money for its own purposes, but if the fintech fails, you have a claim against the safeguarding arrangement rather than automatic FSCS compensation.

Always check whether a fintech has a full banking licence (authorised by the PRA) or an e-money licence (authorised by the FCA under the Electronic Money Regulations). Full banking licence = FSCS protection up to £85,000. E-money licence = safeguarding arrangement (similar protection in practice but not the same automatic process). Most major UK challenger banks (Monzo, Starling) now hold full banking licences. If you use a money management app or a "cashback" savings account that places your money with partner banks, check which bank holds your deposits — the FSCS limit applies per institution, not per app. Some fintechs spread your money across multiple banks to give you protection beyond £85,000 automatically — this is a service feature worth seeking out for large cash holdings.

What FSCS Does Not Cover

The FSCS does not cover all financial products or scenarios. It does not cover: investment losses due to market performance (only firm failure); currency exchange losses; products that are not FCA-regulated (e.g. cryptocurrency, though some crypto platforms are now FCA-registered for certain activities); large deposits over £85,000 (unless under temporary high balance protection); deposits with overseas banks (including EEA branches — these are covered by the home state scheme, if at all); and claims against firms that are no longer authorised by the FCA. The FSCS also does not cover losses from poor investment performance, even if the advice was poor — the separate £85,000 limit for advice claims applies only when the firm has failed and you can prove the advice was unsuitable.

There is a common misconception that the FSCS protects against fraud or identity theft. It does not — if someone steals money from your bank account, you are protected by the bank's fraud protection obligations under the Payment Services Regulations (and the Contingent Reimbursement Model for authorised push payment scams), not the FSCS. The FSCS only applies when a financial firm becomes insolvent or is declared in default. If you have concerns about FSCS coverage for a specific product or firm, check the FSCS website (fscs.org.uk) or the FCA register (register.fca.org.uk). The FSCS also publishes a list of firms that have failed, the date of default, and the status of claims, so you can check if a current or past firm is affected.

It is worth noting that the FSCS protection limit is periodically reviewed. In 2020, the limit was temporarily increased from £75,000 to £85,000 to reflect currency fluctuations against the euro. Any future changes to the protection limit will be announced by the government and the Prudential Regulation Authority. Savers with significant cash balances should monitor these announcements and adjust their savings strategy accordingly. The FSCS website provides updates on any changes to coverage limits, and major financial news outlets report on deposit protection changes. For most savers, the current £85,000 limit (and £1 million temporary high balance protection) provides adequate protection when combined with the strategy of spreading cash across multiple banking groups and using joint accounts to maximise coverage for couples.

FAQs

How much is FSCS protected per person?

£85,000 per person per FCA-authorised institution. For joint accounts, each person is protected up to £85,000 for their share, so £170,000 total for a two-person joint account.

What happens if a bank fails?

The FSCS aims to pay compensation within 7 days of a bank failure. In most cases, you do not need to claim — the FSCS automatically contacts you and arranges repayment.

Does the FSCS protect money in ISAs?

Yes — ISAs are protected up to £85,000 per person per institution, subject to the same rules as standard accounts. The protection applies per institution, not per account type.

Are all banks covered by FSCS?

Only banks and building societies authorised by the PRA and FCA are covered. Check the FSCS register at fscs.org.uk. Challenger banks and fintechs should confirm their FSCS status.

How do I claim FSCS compensation?

For most bank failures, the FSCS pays automatically. For investments or advice claims, you need to submit a claim via the FSCS website with supporting evidence. Claims can usually be filed online.