The Financial Group
We simplify all those essential financial decisions
THE EDUCATION SECTION Every month we look at a particular financial topic in a little more detail. This month it is the FSCS   (updated February 2017) ____________________________ What is it? The   Financial   Services   Compensation   Scheme   (FSCS)   is   the   official   body   that   can   pay   you   compensation   if   your financial services provider fails - known as being 'in default'. Key points Limits   apply   to   how   much   compensation   the   FSCS   may   be   able   to   pay,   and   those   limits   vary   between   different types of financial products. For the FSCS to pay you compensation, the provider must be authorised by the Financial Conduct Authority (FCA). The FSCS is an independent body set up by government under the Financial Services and Markets Act 2000. How is it funded? Financial services providers fund the FSCS and the compensation paid. What is the compensation limit? Deposits Compensation   limits   apply   to   individuals   not   accounts.   This   means   that   for   joint   accounts   the   limit   applies   to   each named   account-holder.   So   for   example,   if   you   have   a   joint   account   with   your   spouse   or   partner,   you   could   each make a claim of up to £85,000 under the deposit limits.  Investment business £50,000   per   person   per   firm   for   claims   against   firms   declared   in   default   from   1   January   2010.   For   firms   declared   in default   before   that   date   the   maximum   level   of   compensation   for   claims   is   100%   of   the   first   £30,000   and   90%   of the next £20,000, up to £48,000 per person per firm. Home finance (mortgages) £50,000   per   person   per   firm   for   claims   against   firms   declared   in   default   from   1   January   2010.   For   firms   declared   in default   before   that   date   the   maximum   level   of   compensation   for   claims   is   100%   of   the   first   £30,000   and   90%   of the next £20,000, up to £48,000 per person per firm. Insurance policies The   FSCS's   main   aim   is   to   secure   continuity   of   cover   for   policyholders   -   that   means,   for   example,   ‘we   will   try   to transfer   your   insurance   policy   to   a   new   insurance   provider.   If   that   is   not   possible   we   can   pay   compensation   at   the level   of   90%   of   the   value   of   your   claim   with   no   upper   limit.   Some   compulsory   insurance,   like   third-party   motor insurance, is protected in full.’ Insurance broking The   FSCS   can   pay   compensation   at   the   level   of   90%   with   no   upper   limit.   Compulsory   insurance,   like   third-party motor insurance, is protected in full. What is covered? Deposits This   covers   money   in   current   accounts,   savings   accounts,   etc.   If   your   bank,   building   society   or   credit   union   is unable   to   return   the   money   in   your   account   to   you   because   it’s   in   default,   the   FSCS   may   be   able   to   pay compensation. Investment business The   FSCS   can   pay   compensation   to   consumers   who   lose   money   because   of   bad   or   misleading   advice,   negligent management   of   investments,   misrepresentation   or   fraud,   and   the   firm   concerned   has   gone   out   of   business   and can’t   return   your   investments   or   money   owed.   The   FSCS   do   not   pay   compensation   for   losses   arising   solely   from investment performance. Home finance (mortgages) The   FSCS   can   pay   compensation   if   a   firm   advised   you   to   enter   into   a   mortgage   agreement   that   wasn’t   suitable   for you,   and   you   lost   money   as   a   result,   and   the   firm   concerned   goes   out   of   business   and   can’t   return   money   owed   to you. Insurance policies The   FSCS   can   pay   compensation   if   an   insurance   firm   becomes   insolvent   and   can’t   pay   valid   claims   under   the   policy or   return   your   premiums.   The   cover   does   not   apply   to   policies   on   marine,   aviation,   transport   business,   credit insurance or reinsurance. Insurance broking The   FSCS   can   pay   compensation   if   you   were   mis-sold   an   insurance   policy   and   lost   money,   or   if   you   were   a   victim of   fraud.   The   cover   does   not   apply   to   policies   on   marine,   aviation,   transport   business,   credit   insurance   or reinsurance. What is ‘overlap’? With   reference   to   deposits,   some   banks,   building   societies   or   credit   unions   share   FSA   authorisation.   This   is   known as   ‘overlap’,   and   is   important   to   know   because   the   FSCS   compensation   limit   for   deposits   applies   per   authorised firm  - not  by brand. Some   banking   brands   are   actually   part   of   a   single   authorised   firm    -   A   good   example   is   Bank   of   Scotland   and Halifax.   If   you   have   a   current   account   with   Bank   of   Scotland   and   savings   with   Halifax,   as   they   share   the   same   FCA authorisation   they   are   classed   as   a   single   firm.   That   means   your   total   limit   for   compensation   is   £85,000   in   total, shared across both Bank of Scotland and Halifax. Click here  to go to the FCA search page for more help. Click here   to go to the FSCS Compensation limits page. Finally, as always, do not hesitate to contact us  if you would like further details or information.