How Safe Is Your Money in a UK Bank? (FSCS Explained)
Worried about what might happen if your bank or building society fails? In the UK, most deposits are protected by the Financial Services Compensation Scheme (FSCS). This means that if your bank goes out of business, you can still get your money back up to certain limits.
What Is the FSCS?
The FSCS is an independent, government-backed scheme that protects customers of authorised financial services firms. If a bank, building society, or credit union becomes insolvent, the FSCS steps in to compensate eligible customers automatically. You do not need to make a claim unless specifically asked — the process is usually handled without any action from you.
How Much Money Is Protected?
The standard FSCS deposit protection limit is £85,000 per person, per authorised institution. This means:
- If your bank fails, you are guaranteed to get back up to £85,000 of your eligible deposits.
- Joint accounts have a combined limit of £170,000 — £85,000 for each account holder.
What Counts as an Authorised Institution?
Some banking brands share the same banking licence. For example, Halifax and Bank of Scotland are both part of Lloyds Banking Group. In that case, the £85,000 limit applies to the total you hold across all accounts within that group.
Before opening accounts with different brands, check whether they are part of the same group using the FCA Register.
Which Accounts Are Covered?
The FSCS protects most standard personal and business accounts, including:
- Current accounts
- Easy-access and fixed-term savings accounts
- Cash ISAs
- Cash deposits in fixed-rate bonds
What Is Not Covered?
The FSCS does not cover every type of financial product. Common exclusions include:
- Investments such as shares, bonds, and funds (unless the firm itself fails and you are eligible for investment compensation).
- Cryptocurrency holdings — these are not covered under any FSCS scheme.
- Deposits with non-UK institutions or unauthorised firms.
Temporary High Balances
In certain situations, the FSCS can protect balances above the £85,000 limit for up to six months. Examples include:
- Funds from the sale of your home
- Inheritance money
- Insurance or compensation payouts
This temporary extension allows you time to move funds to other accounts without losing protection.
How Quickly Will You Be Paid?
For deposit claims, the FSCS aims to return your money within seven days of the bank or building society failing. In most cases, you will not need to complete any forms, as the compensation is processed automatically.
Maximising Your FSCS Protection
- Spread large deposits across different authorised banking groups.
- Consider a joint account to increase your combined protection limit.
- Check your bank’s authorisation status on the FCA register before opening new accounts.
Final Thoughts
Bank failures in the UK are rare, but the FSCS ensures that your eligible deposits are protected if the worst happens. If you have more than £85,000 to save, consider using multiple banks or building societies to stay within the protection limits. Remember that cryptocurrency and most investments do not have the same level of safety as cash deposits.
Frequently Asked Questions
Is the FSCS a government scheme?
Yes. The FSCS is funded by the financial services industry but is backed by the UK government. This ensures that compensation can be paid even if multiple banks fail.
Does the £85,000 limit include interest?
Yes. The limit covers your total balance, including any interest earned, at the time the bank fails.
Are credit union accounts covered?
Yes. Eligible deposits in credit unions are protected under the same £85,000 per person limit as bank accounts.
Do premium bonds have FSCS protection?
No. Premium bonds are backed by National Savings and Investments (NS&I), which is backed directly by HM Treasury. This is a separate guarantee from the FSCS.