FSCS has paid out £372m in compensation ALREADY in 2018

The year is not over yet, but the Financial Services Compensation Scheme (FSCS) has already paid out a staggering £372 million to people affected by financial collapses and helped them get back on track.

For anyone unaware of FSCS, it’s the UK’s financial compensation scheme of last resort. It can step in when an FCA registered bank, building society or credit union goes bust. For example, if a registered bank goes bust, people’s savings in that bank are protected up to £85,000 per person.

But that’s not all it does. If a financial firm is unable to pay claims made against it because it’s failed, then the scheme steps in, providing a vital safety net for customers.

FSCS handles compensation for a huge range of financial products and the protection is free.

So, who has benefitted from the £372m paid out already in 2018?

Well, over 69,000 people have been helped by FSCS this year. We’ve picked out a selection of the biggest examples from the 2018 report.

Credit union members

Over 10,000 people were impacted by six major credit unions that failed this year. Thankfully all six major firms were under FSCS protection. Savings in Credit Unions are FSCS protected up to £85,000 per person. Any failures are dealt with automatically with no claim required by FSCS. For example, when the Polish Credit Union failed in July, FSCS sent payments totalling more than £300,000 to almost all 600 customers in less than 48 hours.

That highlights just how quickly and conveniently compensation can be paid on accounts that qualify.

Similarly, when the Kensington & Chelsea Credit Union, which traded as Your Credit Union, failed in October, FSCS stepped in. Members with under £1,000 in their accounts quickly received a letter telling them they could get their cash via a Post Office, while those with larger sums received a cheque directly from the scheme.

The Essex Savers Credit Union ceased trading in February and was unable to repay its 5,000 members. FSCS put up £1.7m to ensure its members received their guaranteed savings back.

Around £64,600 was reimbursed to members of the Harp Credit Union after it went bust in September, much of it within one week of the collapse.

At the same time as Harp went under, Dial-A-Cab also failed. FSCS paid over £21m to the 1,250 customers within seven days of the failure being declared.

Stock market investors

When the stockbrokers Beaufort Securities collapsed earlier this year, thousands of its clients were left worrying about when they would be reunited with their cash. FSCS protects up to £50,000 of individual investments. This includes bad advice, poor investment management or misrepresentation and negligence claims relating to mis-selling of pensions.

FSCS worked alongside the accountancy giant PwC and has already reimbursed 15,400 of the 17,500 clients. The remainder have slightly more complex cases that will take a little longer to deal with.

As FSCS has stepped in, the vast majority of Beaufort’s clients are not expected to suffer any loss at all. The total cost to the scheme is expected to be around £50m, spread out over more than one financial year.

SIPP savers

FSCS received around 150 claims for compensation against three SIPP operators which it declared in default. These were Brooklands Trustees Limited, Stadia Trustees Limited and Montpelier Pension

Administration Services Limited, and the claims related to how it operated and administered SIPPs.
SIPP failures are a real trend. Almost a quarter of the claims the FSCS dealt with in 2017/18 related to bad pensions advice and £112m was paid out putting this right.

It’s worth noting that pension freedoms give consumers more choice, but can also create greater risk and only authorised advisers are covered under the FSCS.

Insurance customers

Thousands of motorists risked being left without cover when Alpha Insurance went into liquidation. Had it not been for FSCS and the Danish Guarantee Fund, which worked together to replace 10,700 private motor insurance policies.

It can be very complex when an insurer goes under and FSCS’ legal teams had to work closely with the Danish authorities to agree the process of compensation. Fortunately, the two schemes secured alternative insurance for eligible customers and their policies took effect immediately after their original insurer collapsed.

PPI claimants

For the financial year 2017/18, FSCS received 7,224 claims for PPI mis-selling, paying out an average of £2,455 to successful claimants. With a success rate of almost 80%, it shows that if you believe you were mis-sold this kind of policy from a now-defunct firm then it’s definitely worth making a claim.

If you think you were wrongly sold payment protection insurance (PPI) then you don’t have long to claim. The deadline for making a claim has been set as the 29th August 2019, so it’s really important to get your complaint to your lender before then.

In fact, as the deadline draws near FSCS has said it’s anticipating a “substantial number” of claims in the next few months.

So, what does that mean for me?

If you have been impacted by the failure of any of the businesses mentioned above (or in the report) and haven’t done anything about it, get in touch with FSCS as soon as possible.

For everyone else, it shows the importance of checking that your money is safe. Clearly, one way of doing that is to make sure that any financial firm is FSCS protected before you hand over your money.

But, as a general rule, if a company is regulated by the Financial Conduct Authority (FCA) then it’s usually also protected by FSCS. You can see which firms are FCA regulated via its register.

You should also be able to see the FSCS logo on the website or company documents. If you don’t see it, make sure you ask if the company and product are FSCS protected. Don’t wait until something goes wrong.

While FSCS protects a huge range of financial products, there are compensation limits that apply to each product type. And there are products out there that might sound tempting, but be aware that if something goes awry, there may be no compensation available to you. You only have the FSCS backup if the firm is carrying out the services it is authorised to do. If it’s not authorised to hold deposits but it is, then you will not have the FSCS protection you otherwise would.

For more information on FSCS and the different financial products they help protect, you can visit their website at www.fscs.org.uk.