What is the Financial Services Compensation Scheme?
The Financial Services Compensation Scheme (FSCS) was established by the Financial Services and Markets Act 2000 to act as a “fund of last resort” available for consumers of authorised financial services providers. The FSCS will deal with consumer’s claims against funds/assets, should the company be in default or it has stopped trading. The FSCS is funded by a levy that is imposed on authorised financial services firms.
The FSCS is free to use for any consumer and to date has paid out more than £326 million in compensation in 2012-2013; it assisted more than 85,000 during this period. The FSCS will protect a consumer’s money that is in a UK authorised bank, building society or credit union up to £85,000 and if the deposits/savings are in a joint account, the FSCS will protect the consumer up to £170,000. Investments and Home finance are covered up to £50,000 per person per firm.
The FSCS will protect:
- Insurance policies
- Investment business
- Home finance (for those on or after 31 October 2004)
- Insurance brokering (for policies on or after 14 January 2005)
- Travel insurance when the policy is taken out alongside a holiday or travel booking (for policies on or after 1 January 2009)
The main objectives of the FSCS are:
- Aiming to provide a quality compensation scheme that is fair and efficient
- To provide a cost effective and fully accountable compensation service
- Working to recover monies from defaulted firms quickly
- Providing a good working partnership with other regulatory bodies in order to benefit the UK’s regulatory framework
- Provide regular and easily accessible information to all consumers