The Financial Services Compensation Service (FSCS) is an independent body that was created on 1st December 2001. It can pay compensation if a wealth manager is unable, or is likely to be unable, to pay claims against it and is thus in default. This is usually because it has stopped trading, has insufficient assets to meet claims, or is insolvent.
Investments covered by the FSCS include stocks and shares, unit trusts, futures and options, personal pension plans and long-term investments, such as mortgage endowments. Examples include:
If you want to make a claim against a failed investment firm, such as a financial adviser, you need to send the following details to the FSCS:
You can only take your case to the FSCS if the wealth manager is regulated by the Financial Conduct Authority (FCA), which you can check on the FCA's website. European firms that are authorised by their home regulator and operate in the UK may also be covered. The FSCS also covers deposits, insurance policies, insurance broking and mortgages. Joint account holders of bank accounts can each claim for compensation from the FSCS.
The FSCS will handle claims against firms that were insolvent before 1 December 2001. But the claim is covered by rules governing compensation schemes that existed before 1 December 2001, such as the Investors Compensation Scheme.
There are also limits to the amount of money you can claim through the FSCS:
Investments For firms declared in default on or after 1 January 2010 there is a limit of £50,000 per person per firm. For firms declared default before 1 January 2010 is 100 percent of the first £30,000 and 90 percent of the next £20,000 up to £48,000 per person per firm.
Deposits - From 1 January 2016, the deposit compensation limit is £75,000. However, there is also a £1 million protection on temporary high balances in your bank account. This is defined by the FSCS as the result of specified major life events that lead to a large amount of money being held in a person's account for up to six months.
Insurance - For firms declared in default on or after 3 July 2015, there is 100 percent protection where claims arise in respect of a liability subject to compulsory insurance, where claims arise in respect of a liability subject to professional indemnity insurance, or where claims arise from the death or incapacity of the policyholder due to injury, sickness, or infirmity. Protection is at 90 percent where claims arise under other types of policy with no upper limit. No protection is available for goods in transit, marine, aviation and credit insurance. Contracts of reinsurance are also not protected.
Home finance For firms declared in default on or after 1 January 2010 there is a limit of £50,000 per person per firm. For firms declared in default before 1 January 2010 the limit is 100 percent of the first £30,000 and 90 percent of the next £20,000 up to £48,000 per person per firm.
The limits do change over time, but full details can be found on the FSCS website.
If the firm is no longer trading, but still has assets that could meet your claim, the FSCS is unlikely to be able to help, as you will need to contact the firm directly. Try the FSA if you cannot find the firm because it has moved. If the firm will not consider your claim, you will have to think about taking legal action. If the firm has 'disappeared' then contact the FSCS.
Practical Problems - Even if you follow the above guidelines on how to make a complaint, it may not run smoothly. There is no guarantee your complaint will be upheld. Furthermore, even if you are successful, it can be a time-consuming process. One of the greatest difficulties can be in tracing the wealth manager if it is no longer trading under its original name. The FCA may be able to assist you in this process.
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