Protection of deposits and investments

The UK Financial Services Compensation Scheme (FSCS) may offer protection if a client suffers financial loss as a direct consequence of a UK financial institution being unable to meet any of its liabilities. Payments to eligible claimants under the FSCS will vary depending on the type of protected claim (for example, a deposit or investment) that the claimant has.

Eligible claimants include individuals and some other clients, such as small enterprises or beneficiaries of certain eligible types of trust. For joint accounts, each individual account holder is eligible to claim up to the relevant FSCS limit.

Claims in respect of protected investment business and mortgage advice are currently limited to 100% of the first £30,000 and 90% of the next £20,000 of an investor’s protected investments, so the maximum compensation from the FSCS is £48,000. From 1 January 2010, the limit will become 100% of the first £50,000.

Compensation payments to eligible depositors under the FSCS are limited to 100% of the protected deposits up to a maximum of £50,000 or €50,000, whichever is the greater.

Some types of claimants and accounts are not covered by the FSCS. While the determination of eligibility for compensation ultimately lies with the FSCS, the main exceptions to the FSCS’s coverage are as follows:

• Where client money is deposited with overseas banks or building societies, or as fiduciary deposits, as part of our Cash Management Service;
• Claims by financial institutions, collective investment schemes, local authorities, occupational pension schemes and similar bodies;
• Claims by large companies (i.e. a company that is not a “small company” under section 382 of the Companies Act 2006, which, in summary, is one that satisfies at least two of the following three conditions: turnover of less than £6.5 million; balance sheet total of less than £3.26 million; fewer than 50 employees); and
• Claims by large partnerships or large mutual associations (a partnership, mutual association or unincorporated association with net assets of more than £1.4 million).

Note that the above financial criteria may be amended by the government from time to time. Further guidance on eligibility, including how the rules apply to charity clients, is available from the FSCS’s website at: www.fscs.org.uk/consumer/faqs/deposit_claims_faqs/ .

A detailed description of the Financial Services Compensation Scheme (including information on how to make a claim, eligibility criteria and the procedures involved) is available from the Financial Services Compensation Scheme who can be contacted at 7th Floor, Lloyds Chambers, Portsoken Street, London E1 8BN or via their website at www.fscs.org.uk .

June 2009