Financial Services Compensation Scheme

Question 1

What is the FSCS and what does it deal with?

Answer 1

1. FSCS - Financial Services Compensation Scheme
2. The FSCS handles claims against insolvent (bankrupt) or non-trading authorised firms.
3. For firms still trading, claims must go through the FOS (Financial Ombudsman Service).

Question 2

What types of claims are eligible for compensation under the FSCS?

Answer 2

1. Only claims related to activities regulated by the FCA or PRA are eligible.
2. These are protected investment business and include:
   A. Designated investment business carried out by the firm.
   B. Activities of managers/ trustees of authorised unit trusts (AUT), for claims made by unitholders.
   C. Activities of the authorised corporate director (ACD) or depositary of ICVC (e.g., open-ended investment companies), provided that the claim is made by shareholders.

Question 3

Under the FSCS - What is the time limit to make a claim?

Answer 3

Claims must be made within six years of the event causing the claim.

Question 4

Under the FSCS - What is the maximum payout for claims?

Answer 4

1. For protected investment business/ firm, the maximum payout is £85,000.
2. For deposits at UK-authorised banks, the compensation is £85,000. (E.g. for deposits lost through bank failure.)
3. For long-term insurance (e.g., life or annuities) and pension providers, the compensation is 100% of the claim.

Question 5

How is the FSCS funded?

Answer 5

1. The FSCS is funded through a levy on financial services firms regulated by the FCA or PRA.
2. The levy depends on the type of financial services firm.
   E.g. for banks, the levy is dependent on the number of protected deposits it holds.