When selecting a financial institution to safeguard your funds, it is crucial to ensure that they offer FSCS protection. This essential safety net guarantees the return of your money if the institution faces insolvency.

The past has shown us that bank runs, government interventions, and declines in bank stock values can seriously unsettle savers and investors alike. These events have become all too familiar in recent years.

The financial upheaval that began in 2007 highlighted the importance of understanding how your savings, investments, and pensions are shielded from potential losses.

The Financial Services Compensation Scheme, known as FSCS, provides coverage for funds held in each separately licensed bank, up to a limit of £85,000. This ceiling is set to rise to £110,000 come December.

While the scheme also covers investments and pensions, the protection works differently compared to cash savings.

Here are the key details you need to grasp about FSCS compensation.

What is FSCS protection?

The FSCS was set up in 2001 and forms an important part of the UK’s regulatory landscape.

In the unlikely event your bank, building society or credit union goes bust, you should get your savings back, as long as you meet certain conditions.

Firstly, the provider holding your cash must be authorised by the Financial Conduct Authority (FCA) and covered by the Financial Services Compensation Scheme (FSCS). They should advertise clearly whether they’re part of the scheme. You can also check this on the FSCS website.

Secondly, you’ll only get back savings worth up to £85,000 per bank. If you have a joint account, you’re covered up to £170,000.

This means it’s a good idea to avoid holding more than £85,000 individually with each bank or building society.

When your money is FSCS protected, the scheme covers the entire amount held within the banking group, not each account. This means you should watch out for banks with a number of brands. For example, First Direct is owned by HSBC, and Royal Bank of Scotland is another brand under the NatWest bank.

You may get protection of up to £1 million for up to six months if you have a temporarily high balance, for example after a house sale.

What kind of problems can banks experience? 

Bank failures were a hallmark of the financial crisis, with some of Britain’s biggest names getting into serious trouble. Halifax, Bank of Scotland, NatWest and Northern Rock needed rescuing.

Wobbles have occurred since, and there was another round in 2023. Silicon Valley Bank in the US collapsed and HSBC had to bail out its UK arm. Then banking giant Credit Suisse announced it had secured a £45 billion lifeline from Switzerland’s central bank and was merged into UBS.

The headlines may have reminded savers of the financial crisis but the circumstances were different. In this instance, banks were affected by rapid rises in interest rates denting the value of the ‘safe’ government bond assets that they held. Regulators stepped in quickly and the crisis was contained.

The good news for savers and the economy is that banks are in a lot better nick than in 2008. They have to comply with far more robust Bank of England regulations and are stress-tested regularly.

And even if something did go wrong, UK savers and investors benefit from a number of protections in an improved system.

When is the FSCS limit going up?

The FSCS limit is due to increase from £85,000 to £110,000 in December 2025. 

The limit hasn’t risen in eight years, so this is welcome news for savers, giving you more peace of mind when stashing your money with a particular provider.

Are investments protected by the FSCS?

When investing, your money is often FSCS protected, but the way protection works is slightly different.

Investment providers are very tightly regulated, and the provider should be holding your money safely in a separate client account so it can’t be touched if the firm were to run into trouble.

But things do go awry, so it pays to know you’ll generally be FSCS protected up to £85,000 if you lose out as a result of a provider failing.

When you invest in stocks and shares, you own the underlying investment, not the investment provider. Even if the platform implodes, you should still be able to transfer the investments to a new broker – and the FSCS may cover any costs involved.

Furthermore, if an authorised firm gives you bad advice or is negligent in its management of your investments, you should be covered.

However, you won’t be compensated if your investments drop in value due to movements in financial markets. That is just part of the risk of investing.

Before investing, check the firm is authorised by the Financial Conduct Authority (FCA) or the Prudential Regulation Authority (PRA). Make sure it’s regulated to do the activity it’s offering you, for example giving investment advice.

Some investment types offer no protection. These include cryptocurrencies, mini-bonds and peer-to-peer lending.

You can check whether your investments are protected by the FSCS. 

Does the FSCS protect my pension?

Should your pension provider go bust, the compensation you’re entitled to will be determined by the type of pension you have and whether it’s regulated by the FCA.

Defined contribution pensions: These are pension schemes where both you and your employer pay in a set monthly amount.

Although these schemes are arranged by your employer, your money is held and managed by a separate pension provider. That means if your employer goes bust, it won’t affect your pension holdings. Whether your savings have FSCS protection should the pension provider go bust depends on how your scheme was set up. You can check this with your pension provider.

Self-invested personal pensions: In most cases, if your self-invested personal pension (Sipp) provider were to go bust, you would receive up to £85,000 FSCS compensation.

However, some providers structure their Sipps so all of your savings are covered. Ask your provider what protection it offers.

Defined benefit pensions: Also known as final salary, this type of workplace pension offers a guaranteed income in retirement. It’s up to your employer to ensure there’s enough money available to pay out.

Pension funds are usually ring-fenced from the company balance sheet, so even if your employer gets into financial difficulty your pension should be protected.

If the scheme can’t pay, your pension is taken over by the Pension Protection Fund (PPF), which is a lifeboat fund set up by the government.

The PPF can compensate you for 100 per cent of your pension if you’ve already reached the normal pension age at the time your employer goes bust, or if you’ve retired early because of illness.

But if you’re not at the scheme’s retirement age, you’ll only be entitled to 90 per cent compensation, to a set limit.

It’s possible to find out whether your pension is protected under the FSCS. 

Which financial providers have FSCS protection?

UK-authorised banks, building societies and credit unions should have FSCS protection. It gets a little murkier when a provider isn’t authorised by the Prudential Regulation Authority, for example if it’s an e-money firm or payment service provider.

Newer app-based platforms such as Revolut and Wise count as e-money firms. Although you now have lots of choice when it comes to where to put your money, it really pays to check how it’ll be protected.

E-money providers are still regulated by the FCA and required to safeguard your money by holding it separate from their own, for example with a bank.

But you should find out which banks these platforms partner with. Keep in mind it’s the amount you hold with each bank in its entirety that’s protected, not each account, and you may already have money with these partner banks.

We cover a selection of providers that have – or don’t have – FSCS protection below.

Is Revolut FSCS protected?

No, Revolut itself doesn’t have FSCS protection, because it’s an e-money provider. It’s been authorised ‘with restrictions’ but still doesn’t have a full banking license.

Revolut safeguards your money by holding it in a separate client account with a global bank, or by investing it in low-risk assets that Revolut would be able to access and pay back to you were it in trouble.

The provider holds any investments you have separate from its own.

For money in savings accounts, Revolut holds your cash with partner banks that have FSCS protection, so it should be covered if the partner were to fail.

Read more: Revolut receives more fraud complaints than any other bank for third year running

Is Trading 212 FSCS protected?

Trading 212 doesn’t have FSCS protection itself, because it’s not a UK-licensed bank.

If you’re an investor, it keeps your assets separate from its own by holding them with a different custodian. They still belong to you if Trading 212 were to fail.

With regards to cash, Trading 212 segregates money held in a cash Isa, or uninvested in an investment account such as a stocks and shares Isa, with partner banks that have FSCS protection. This means if the partner bank fails, you should be compensated.

Read our Trading 212 review to find out whether Trading 212 is a good platform for your investments.

Is Monzo FSCS protected?

Yes – Monzo itself is FSCS protected because it’s authorised as a bank by the Prudential Regulation Authority (PRA).

This means your eligible deposits with the bank are covered up to £85,000 – this generally means the cash you hold in your current and savings accounts.

You can also invest with Monzo, and you’ll be compensated if you lose out financially in the case that Monzo fails and can’t fulfil its financial obligations to you. But you’re not covered if your investments drop in value, because this is the normal risk involved when investing.

Discover our pick of the best bank accounts for switching offers, cashback and interest.

Is Plum FSCS protected?

Plum itself doesn’t have FSCS protection, but it segregates your money with separate banks that do have FSCS protection. Be sure to check which banks your money is held with, because you might already have cash with them.

Plum regularly features in our list of the best cash Isa savings rates.