FSCS explained

By FMB on 

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What is the Financial Services Compensation Scheme and what does it cover?

“I've had a few questions recently from clients about the Financial Services Compensation Scheme (FSCS). If you aren't familiar with the FSCS already, they provide protection for customers of financial services firms that have failed, this can include banks and investments.

They protect UK authorised banks or building societies up to £85,000 per person per banking institution and £170,000 in the case of jointly held accounts. Therefore, we recommend that our clients bear this in mind when structuring their cash savings.

The FSCS will also cover temporarily high balances (in certain circumstances, see the FSCS website information here) of up to £1 million for 6 months from when the amount was deposited: This is useful to remember if you have just sold your home for example.

A client recently asked if the protection and limits would change as a result of BREXIT. Per the FSCS guidance here, "FSCS protection for UK-based customers of UK authorised firms will not change as a result of the UK leaving the European Union (EU). This means that in most cases existing FSCS protection will continue, including after the Brexit transition period ends at 11pm GMT on 31 December 2020. However, FSCS protection may change if a customer and/or their firm is based in the European Economic Area (EEA).". Therefore, if your financial provider is UK authorised then there should be no change. In terms of any changes to the limits, FSCS said "There are currently no plans to revise the FSCS deposit protection limit.".

The FSCS also covers investments and pensions as long as the provider or adviser is authorised and the activity (e.g. giving advice) is regulated.
The FSCS will cover up to £85,000 per person, per firm if the firm has failed and they provided bad advice, were negligent or caused you to lose money due to fraud. They will not cover poor investment performance.

If you are receiving investment advice then it is definitely worth checking if the firm you are dealing with is authorised by the PRA or FCA, you can check this on the FCA website here.”

- Charlie Rigg, FMB Chartered Financial Planner

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