Aga Khan Economic Planning Board for the United Kingdom
Financial Services Compensation Scheme
(Last Updated: 29 March 2020)
Background
Who is this guidance for?
This guidance is for Companies, Limited Liability Partnerships ("LLP"), Unincorporated Associations and individuals with deposits held in banks, building societies and credit unions that are authorised.
What is the Financial Services Compensation Scheme (“FSCS”)?
The Financial Services Compensation Scheme is a non-profit, independent organisation set up under the Financial Services Markets Act 2000. It is a UK-based “funds of last resort" for clients of business conducted by firms that are regulated by the Financial Services Authority. The service is free to consumers.
What does the FSCS cover?
The FSCS covers business conducted by firms (e.g. banks or building societies) authorised by the Financial Conduct Authority ("FCA") and can pay compensation to consumers if an authorised firm is unable, or likely to be unable, to pay claims against it. The rules for the FSCS are made by the FCA and they set out which types of claims can be considered.
What is the compensation limit for deposits?
The compensation limit for deposits is £85,000 (£170,000 for joint accounts). Provided you meet all the conditions to qualify for compensation, the FSCS can pay compensation to each person, per authorised firm. Deposits in more than one account under a single brand, or multiple accounts under different brands owned by a single firm, is only protected up to a total of £85,000 across all these accounts.
When will the FSCS pay claims?
The FSCS will pay out to “eligible claimants” only when a firm covered by the scheme:
1. stops trading, and
2. does not have sufficient assets to fund client claims due to its insolvency
Why might I be asked to provide information on eligibility?
The FCA aims to ensure that the FSCS can pay compensation to eligible depositors of the failed deposit taker firm quickly and effectively. As a result, firms are required to have a “single customer view” (“SCV”).
The SCV is a single, consistent view of the aggregate deposits with the firm of clients eligible for deposit compensation. The SCV is intended to put the FSCS in the position where it has the information required to make fast payout of compensation, with a payout target of seven days from the date of default and in any event within 20 days.
It is therefore important that your deposit takers have an accurate, up to date record of your eligibility for compensation.
What happens if my balance exceeds the compensation limit?
If you have deposits greater than the FSCS limit, you may receive a further payment, or payments, of your share of any money left with the firm if they were declared in default.
However, this will not necessarily cover all of your loss, is not guaranteed and will depend on how much money was left in the firm when it failed and how that money is allocated to creditors.
Does the Scheme cover deposits made in different currencies?
Yes. However, in most cases your deposit taker will provide details of the amount you hold with them in sterling, and the FSCS will pay you compensation in sterling.
Does the Scheme cover deposits in UK branches of overseas (non-EEA) banks?
UK branches of non-EEA deposit-takers authorised by the PRA to accept deposits in the UK are protected by the FSCS up to the deposit protection amount. If you are unsure how your money is protected, you can contact your bank for information.
Companies
How is a Company defined under UK rules?
A company is defined under the FCA rules as any corporate body including a corporate body constituted under the law of a country or territory outside the United Kingdom.
Can companies apply for compensation under the FSCS?
The FCA Handbook of rules and guidance sets out which individuals and organizations are eligible to make a claim for compensation. Under the FCA rules a Company will be eligible for deposit compensation if it is a “small company” as defined under the Companies Act 2006.
A company would be treated as having a claim, and hence protection in its own right up to the £85,000 limit if it fell within the definition of a "small company". A company qualifies as a "small company" under the provisions of section 382 of the Companies Act 2006 if it fulfils two of the following three criteria:
- Turnover of £6.5 million or less
- Balance Sheet total of £3.26 million or less
- 50 or less employees
Can a Public Company be eligible for deposit compensation?
No. Public Companies are excluded from the definition of a small company and as such are not eligible.
How do I calculate the number of employees per financial year?
The number of employees means the average number of persons employed by the company in the year. This should be determined as follows:
- Find for each month in the financial year the number of persons employed under contracts of service by the company in that month (whether throughout the month or not),
- Add together the monthly totals, and
- Divide by the number of months in the financial year.
What is meant by "balance sheet total"?
The balance sheet total means the aggregate of the amounts shown as assets in the company's balance sheet.
My company is not registered in the UK. Does this mean it is not eligible for FSCS compensation?
No. Whether or not a company is registered or incorporated in the UK does not have any implication on the company’s eligibility under the FSCS.
Further information
FSCS Contact details
Website: http://www.fscs.org.uk
Customer Services Team: 0800 678 1100
Email: [email protected] (Enquirers should include their full name and address in the email)
Post:
Financial Services Compensation Scheme
PO Box 300
Mitcheldean
GL17 1DY