How Are Your Money and Investments Protected in the UK?
What happens if your bank or investment company goes bust?
It's a worry many of us have but don't talk about. What if the bank holding your hard-earned cash suddenly closes down? Or what if the company looking after your investments fails?
The good news is that in the UK, there are safety nets in place to protect your money. But these safety nets don't cover everything. Some types of investments have little or no protection at all.
This guide will walk you through what's protected and what isn't, in simple terms.
Bank Accounts and Building Societies: The FSCS Protection
The main protection for your bank accounts comes from something called the Financial Services Compensation Scheme (FSCS).
What does the FSCS protect?
Current accounts
Savings accounts
Cash ISAs
Building society accounts
How much protection do you get?
The FSCS protects up to £85,000 per person, per banking group.
This means if you have £85,000 or less in one bank, all of your money is protected. If the bank fails, you'll get all your money back.
Important to know: If you have accounts with different banks that are part of the same banking group (like Halifax and Bank of Scotland, which are both part of Lloyds Banking Group), the £85,000 limit applies to the total amount across all those banks.
For joint accounts, the protection doubles to £170,000.
Temporary high balances
If you've recently sold your house, received an inheritance, or got a large payout (like from an insurance claim), you might temporarily have more than £85,000 in your account.
For cases like these, the FSCS offers extra protection of up to £1 million for up to six months.
Savings and Investments: What's Protected?
Different types of investments have different levels of protection:
Protected investments (usually up to £85,000):
Stocks and shares ISAs
Personal pensions (SIPPs)
Investment funds through a UK-regulated provider
Bonds purchased through a UK-regulated provider
Endowment policies
Investment bonds from insurance companies
How the protection works for investments
The protection for investments works differently than for bank accounts. The FSCS doesn't protect you against your investments losing value - that's a normal investment risk.
What it does protect you against is the company holding your investments going bust. If that happens, you should still get your investments back, as they're usually held separately from the company's own money.
The £85,000 compensation limit applies if:
The company fails and there's been fraud or negligence
Your investments have gone missing
The company can't return your investments to you
What Has Little or No Protection?
Not everything is protected by the FSCS. Here are some investments with little or no protection:
Cryptocurrencies
Bitcoin, Ethereum, and other cryptocurrencies have no FSCS protection. If a crypto exchange fails or gets hacked, you could lose everything.
Peer-to-peer lending
When you lend money directly to people or businesses through platforms like Funding Circle, this usually has no FSCS protection.
Foreign exchange trading (Forex)
Speculating on currency movements often comes with limited or no protection.
Crowdfunding investments
Investing in businesses through crowdfunding platforms usually has no FSCS protection.
Overseas investments
Investments with companies not regulated in the UK might not be covered by the FSCS.
Buy-to-let properties
Property investments don't have FSCS protection (though your deposit for a property purchase might be protected by other schemes if held by a solicitor).
How to Check If Your Money is Protected
Check if your bank or provider is FSCS protected - Look for the FSCS logo on their website or ask them directly
Check if different accounts are with the same banking group - Remember, the £85,000 limit is per banking group, not per account
Visit the FSCS website - Search for your provider on the FSCS protection checker tool
Spread your money - If you have more than £85,000, consider spreading it across different banking groups
What to Do If You're Worried
If you're concerned about the safety of your money or investments:
Check your provider's protection - Make sure they're covered by the FSCS
Spread larger sums - Don't keep more than £85,000 in accounts with the same banking group
Be extra careful with high-risk investments - Only invest what you can afford to lose in unprotected investments
Get advice - Speak to a financial adviser if you're unsure about your investments
In Summary: Know Your Protection Levels
Type of Account Investment Protection Level Bank accounts & savings Up to £85,000 per person, per banking group Joint bank accounts Up to £170,000 per account Temporary high balances Up to £1 million for 6 months Protected investments Up to £85,000 if provider fails Pensions Up to £85,000 per pension provider Cryptocurrencies No FSCS protection Peer-to-peer lending Usually no FSCS protection Overseas investments May not be FSCS protectedRemember, the FSCS protection is there as a safety net, but it's always best to understand what risks you're taking with your money in the first place.
By spreading your money across different providers and being careful about higher-risk investments, you can help keep your finances safe and secure.
What If You're Missold an Investment?
Sometimes financial companies don't play fair. They might sell you an investment that:
Wasn't suitable for your needs
Came with risks that weren't properly explained
Was described in a misleading way
Was sold with pressure tactics
This is called 'misselling' and you have rights if it happens to you.
Your Rights When Missold an Investment
Complain to the provider first
Put your complaint in writing
Explain clearly why you think you were missold
Say what you want them to do to make it right (usually a refund plus interest)
Keep copies of all communications
The provider must respond
They have 8 weeks to give you a final response
They may offer compensation or explain why they don't think it was misselling
If you're not happy with their response
You can take your complaint to the Financial Ombudsman Service (FOS)
This is free to use and independent
They can force companies to pay compensation if they agree you were missold
FSCS protection for misselling
If the company has gone bust, the FSCS might pay compensation for misselling
This is covered by the same £85,000 limit mentioned earlier
Famous Misselling Scandals
There have been some big misselling scandals in the UK:
PPI (Payment Protection Insurance): Banks had to pay back billions for selling insurance that many people couldn't use or didn't need
Pension transfers: Some people were wrongly advised to transfer out of good workplace pensions
Endowment mortgages: Many people were sold policies that didn't grow enough to pay off their mortgages
How to Avoid Being Missold
Ask lots of questions about risks
Never be rushed into a decision
Get everything in writing
If you don't understand something, don't buy it
Be wary of anything described as "guaranteed" or "risk-free"
Check if the adviser is regulated by the Financial Conduct Authority (FCA)
Remember, if something sounds too good to be true, it probably is!
This article is for information only and does not constitute financial advice.