The Financial Services Compensation Scheme

For those who are studying for any of CII CF1, CF8, ER1, J10, R01, or R06, it’s important to have an understanding of the Financial Services Compensation Scheme (FSCS) and know the latest limits that apply. 

The Financial Services Compensation Scheme (FSCS) exists to compensate claimants where a regulated firm or individual is unable to satisfy claims against them in connection with regulated activities.

If the FSCS judges that a firm is in default, the firm must pay compensation to all eligible claimants affected by the default. The limits of compensation for each claimant will depend on whether the claim is for a protected deposit, a protected insurance contract, or protected investment business.

The FSCS is funded by a levy on authorised firms.

Deposit Limits for Bank and Building Society Accounts

Protected deposits include deposits at UK banks, building societies, and credit unions. Deposit limits for these accounts are £85,000 per eligible person per firm and £170,000 for joint accounts.

Temporary High Balance Limits

A £1 million protection limit applies to customers with temporary high balances for a period of six months from the date of the money being placed into the customer’s account or the date on which they are entitled to draw on the money, whichever is the later. Note: this protection was extended from six to 12 months as a result of the coronavirus pandemic but this temporary measure has now ended.

For the protection to apply, the temporary high balance must have come about due to a specified life event taking place. Specified life events include:

• selling a house;
• receiving benefits under an insurance policy or on retirement; and
• being left an inheritance.

For a full list of specified life events and further details, you can go to the FSCS website.

Other Limits

The other limits are:

• 100% for all compulsory insurances (third party motor and employers’ liability) policies;
• 100% for professional indemnity insurance;
• 100% for long-term insurance;
• 90% with no limit for all other kinds of insurance;
• 100% of the first £85,000 for investments;
• 100% of the first £85,000 for mortgage advice and arranging;
• 100% for pensions (£85,000 limit for SIPPs and bad pension advice)

Grab the resources you need!

If you’re studying for your CII R01 exam, and you’re a little nervous about how you’ll do, grab our free taster to try out one of Brand Financial Training’s mock exam papers for yourself.  Click the link to download the R01 mock exam taster now!

Alternatively, you can download one of the tasters for CF1, CF8, ER1, J10, or R06 if you’re studying for one of those exams.