FSCS Protection Explained: Is Your Money Protected?

The Financial Services Compensation Scheme is an independent, statutory compensation scheme. It pays compensation to customers of authorised financial services firms that have failed — that is, firms that have gone out of business and cannot pay claims against them.

Two things follow from that definition, and both matter.

First, FSCS protection depends on the firm being AUTHORISED. If a firm is not authorised by the FCA or the PRA, there is no FSCS cover at all. This is the single strongest practical reason to check a firm's authorisation on the FCA Financial Services Register before doing business with it.

Second, the FSCS covers FIRM FAILURE. It is not an investment guarantee. If your investments fall in value because markets have fallen, that is not a claim — that is investment risk, and no compensation is payable however large the loss.

The scheme is free to consumers, and for bank deposits, compensation is normally paid automatically without you needing to claim.

The deposit protection limit rose to £120,000 on 1 December 2025. Between January 2017 and November 2025 it was £85,000, and a great deal of published material still quotes the old figure.

The limit is £120,000 per eligible person, per authorised firm. For a joint account, each account holder is separately protected, so a couple can effectively have up to £240,000 protected in a joint account with one firm.

The words \"per authorised firm\" are doing a lot of work. The limit applies per banking licence, not per brand or per account. Several well-known high street brands operate under a shared authorisation, which means money held across those brands counts once towards a single £120,000 limit. Anyone holding large cash balances across what look like different banks should check which licence each brand sits under, because two brands can look entirely separate and still share one limit.

Deposit protection covers current accounts, savings accounts, cash ISAs and other deposits held with a UK-authorised bank, building society or credit union.

There is an important exception for people who are temporarily holding an unusually large amount of cash.

Where a large balance arises from a specified major life event, the FSCS protects up to £1.4 million for a period of six months from the date the money is credited. Qualifying events include the sale of a main residence, an inheritance, a redundancy payment, and certain insurance or compensation payouts.

The protection is time-limited. After six months, the balance falls back to the standard £120,000 limit. This is directly relevant to anyone who has just sold a property or received an inheritance and is deciding what to do next — the six-month window provides breathing space, but it does run out.

The £120,000 increase applied ONLY to deposits. The other limits were not changed, and this is where confusion most often arises.

Investments: protected up to £85,000 per person, per firm. This covers situations such as an investment firm failing and being unable to return your assets, or a claim for negligent regulated investment advice. It includes stocks and shares ISAs and most investments held through a platform.

Pensions: the position depends on the type of failure.

• If the failure is of a SIPP operator, or the claim relates to bad regulated pension advice, the limit is £85,000.
• If your pension is with a long-term insurer — for example an annuity, or a pension held in an insurance contract — protection is 100% of the claim with no upper limit.

Long-term insurance, including annuities and life assurance, is protected at 100% with no cap.

It is worth being precise about what platform failure means in practice. Client assets are normally held separately from the firm's own assets, so in most failures the underlying investments themselves are not lost — they are returned or transferred to another provider. The £85,000 limit is most relevant to shortfalls, costs and cases where assets cannot be reconciled, rather than to the whole value of a portfolio.

The exclusions are as important as the cover.

• Investment losses caused by market falls. If your portfolio drops in value, there is no claim. This is the most common misunderstanding of all.
• Unauthorised firms. No authorisation, no cover. This includes most cryptoasset firms and many unregulated investment schemes.
• Poor performance by a fund manager, as distinct from the failure of an authorised firm.
• Most money held with firms authorised outside the UK, which may be covered by another country's scheme, or by none.

• Shared banking licences. Check the licence, not the brand. Two brands under one authorisation share one limit.
• The £120,000 figure is recent. It only applies from 1 December 2025. A lot of guidance still says £85,000.
• Deposits and investments have different limits. £120,000 for cash; £85,000 for investments and most pensions.
• Temporary high balances expire. Six months, then back to the standard limit.
• Spreading cash across providers is a way to stay within the limits, though it needs to be weighed against the administrative effort and interest rates available.

For anyone holding substantial cash or investments across multiple providers, understanding where the limits fall is a basic piece of housekeeping — and the answer depends on individual circumstances, which is one of the areas where regulated financial advice may be appropriate.