Financial Services Compensation Scheme (FSCS)

The Financial Services Compensation Scheme (FSCS) is the United Kingdom’s statutory compensation scheme designed to protect consumers if an authorised financial services firm (particularly a bank, building society, or credit union) fails and cannot return customers’ money. It is funded by levies on authorised firms and operates independently of government and industry.

Why the FSCS Matters

The FSCS exists to maintain confidence in the UK financial system by ensuring individuals (and some businesses) do not lose money if the firm holding their eligible deposits collapses. For estate administrators, executors or anyone dealing with funds held in bank or savings accounts, understanding FSCS coverage helps assess the risk of holding funds in specific accounts.

What It Covers

From 1 December 2025:

• Cash deposits with UK-authorised banks, building societies or credit unions are protected up to £120,000 per eligible person per institution.
• In a joint account, each account holder is eligible for up to £120,000, effectively protecting up to £240,000 for two people.
• Temporary high balances (for example, the proceeds of a house sale or an inheritance) are protected up to £1.4 million for six months from the date of deposit.

These changes represent a substantial uplift from the previous £85,000 limit, which had been in place since 2017.

How FSCS Protection Works

1. You must hold money with a firm authorised by the UK regulators (FCA/PRA).
2. If the institution fails and cannot return your funds, FSCS steps in.
3. Compensation is automatic and free - you don’t need to apply in advance.
4. Payments are typically made within a few days after a firm is declared in default.

Examples and Use Cases

• An executor holds estate funds in a high-street bank account. If the bank fails, the FSCS will protect up to £120,000 of those deposits.
• An administrator receives a large insurance payout into an estate account and benefits from elevated temporary high balance protection (up to £1.4 million for a limited period).
• A personal account with £100,000 in savings is fully protected by FSCS if the bank collapses.

Mini‑FAQ

Does FSCS cover all types of accounts?
It primarily covers cash deposits. Other categories like investments, pensions, mortgages and insurance have different limits or eligibility criteria, and not all products qualify.

Is FSCS protection automatic?
Yes - if the firm is covered and goes into default, eligible customers are compensated without needing to pre-apply.

Does FSCS protection add to safeguarding?
No. Safeguarding is a pre-emptive operational requirement to protect client funds before failure, while FSCS is a compensation scheme that applies after a firm has failed. They serve related but distinct purposes.

Why This Matters for Estates

For probate and estate administrators, knowing the FSCS limits means you can assess whether holding estate funds in standard bank accounts places assets at risk. Where estate totals exceed FSCS limits, alternatives like safeguarded third-party managed accounts (e.g., held at the Bank of England) provide additional security and mitigated risk exposure beyond standard deposit guarantees.