Financial Services Compensation Scheme

The Financial Services Compensation Scheme (FSCS) is the UK's statutory compensation fund for customers of authorised financial services firms.  It pays compensation if a firm is unable, or likely to be unable, to pay claims against it. The scheme, which is funded by levies on authorised firms, began operation in December 2001. More information is available on the FSCS webpage.

The FSCS covers losses to consumers arising out of an obligation to them by authorised firms, including claims -

• to repay a deposit made by a consumer with the authorised deposit taker;
• to fulfill insurance obligations under a contract for general insurance, life insurance and compulsory insurance;
• in relation to investment business (for example, compensation for loss caused by mis-selling); and
• for misappropriation or loss of assets held for the benefit of the client (for example, through fraud).  

The limits of compensation paid by the FSCS were reviewed in 2005 and were not due to be reviewed again until 2009. However, current market conditions have led FSCS to carry out another review this year: CP 08/15 was published on 3 October 2008: responses are invited by 5 January 2009.