If you are owed money by a financial firm that goes bust, you may be entitled to compensation.
It is important to know how your money is protected and how much compensation you could claim if a UK financial services firm fails.
Follow these 7 steps to find out how to claim compensation.
Step 1: Contact the firm directly
Try to contact the firm to see if it can pay money it owes.
If an authorised firm will not pay you money it owes, the Financial Ombudsman Service may be able to help.
Find out more about how to complain.
Step 2: Check if the firm is still trading
You may be able to find out if a firm is still trading by calling or writing to it, or checking its website.
You could also get this information from Companies House.
If a firm has stopped trading, you should still try to contact it as soon as possible to set out your claim. The Financial Services Compensation Scheme (FSCS) will not pay compensation when a firm has the means to pay any claims made against it.
Step 3: Contact the Financial Services Compensation Scheme
The FSCS can cover eligible individuals (and some businesses) that are, or were, customers of an authorised financial services firm that has been declared ‘in default’.
‘In default’ means when a financial services firm is unable - or likely to be unable - to pay claims made against it.
If the FSCS considers a firm authorised by us to be in default, it will try to contact all customers of the firm to provide a compensation application form.
If you do not receive an application form, you should contact the FSCS to make a claim for compensation.
Step 4: Make a claim yourself
There are many companies that offer to complain or claim compensation on your behalf. These are usually known as claim handlers, claims firms or claims management companies (CMCs). Find out more if you are using, or considering using, the services of a CMC.
Alternatively, you can make a free claim for compensation to the FSCS yourself. It's a simple process and you can get help if you need it.
Remember, if you make a claim through a CMC, do not make a separate complaint yourself. Only one claim should be submitted.
Step 5: Know your limits
There are limits to the amount of compensation the FSCS can pay depending on what type of product you are claiming for.
These limits apply to each person, per authorised firm and product category.
Compensation is only paid to cover financial loss. For investment claims, the compensation paid will try to return you to the financial position you would have been if you did not invest.
|Product||Compensation limit||How it works|
Up to £85,000 per eligible person, per bank, building society or credit union.
Up to £170,000 for joint accounts
Depositors with some types of temporary high balances will have FSCS protection up to £1 million for up to 6 months.
|This includes deposits in a bank, building society or credit union.|
|Investments||Up to £85,000 per eligible person, per firm.||
This applies to investments placed in firms declared in default from 1 April 2019.
You may be compensated if you have a protected claim against a firm that has failed.
|Home finance||Up to £85,000 per eligible person, per firm.||
This includes advising on and arranging mortgages, and applies to home finance firms declared in default from 1 April 2019.
You may be compensated for mortgage advice you received after 31 October 2004 and endowments you were mis-sold after 28 August 1988, if you’ve lost money as a result, and the advisor has since failed.
|Debt management||Up to £85,000 per eligible person, per firm.||
This applies to client money held by debt management firms declared in default from 1 April 2019.
If you bought your insurance policy from an insurance firm that failed after 3 July 2015, the kind of insurance you have and when the firm failed will affect how much compensation you could claim.
For full details, see the FSCS website for compensation limits for current and previous years.
If you have more money with a firm than the FSCS limit covers, you may receive a further payment, or payments, to pay your share of any money the firm has left.
However, this will not necessarily cover all your loss. It will depend on how much money was left in the firm when it failed and how that money is allocated.
Step 6: Find out why a firm is not 'in default'
If you think a firm authorised by the FCA is 'in default' but the FSCS has not declared that it is, contact the FSCS to find out whether it is investigating the firm.
Step 7: Find out what you owe
The FSCS will pay compensation even if you owe money to a firm declared in default.
An exception to this is if your savings or current account is combined with your mortgage account, and operates as a single overdraft.
The depositor will still be responsible for the debt, such as a loan, mortgage or credit card debt.