Investors in the UK enjoy a safety net that many never think about until they need it: the Financial Services Compensation Scheme. This article explains what that protection covers for investments, what it pointedly does not, and how to check whether a firm sits inside the regulatory perimeter at all.
Two different risks that are easy to confuse
Every investor faces at least two distinct kinds of risk. The first is market risk: the value of what you own goes down. The second is firm risk: the platform, manager or adviser holding or arranging your investments fails, goes out of business or loses your assets.
The Financial Services Compensation Scheme (FSCS) deals only with the second. According to the FSCS, it “can’t accept any claims that are for poor investment performance”, because investment values can go down as well as up. A portfolio that has dropped 15% in a weak quarter is not a compensation matter. A platform that collapses and cannot return the assets it was holding for you may be.
Keeping that distinction clear matters, because the existence of a compensation scheme can create a false sense of security. The scheme does not insure returns, does not protect against bad luck and does not make a risky asset safe.
What types of failure can the scheme cover?
According to the FSCS, three situations are relevant to investments:
- The provider or adviser has gone out of business.
- The provider has gone out of business and there is a shortfall in the money or assets it was holding for you. Here the FSCS says it “may be able to protect” you, which is careful wording rather than a guarantee.
- Bad advice that caused you to lose money, where the advice was given on or after 28 August 1988.
Protection also depends on the firm and the activity. The FSCS states that the firm must be authorised by the Financial Conduct Authority (FCA) or the Prudential Regulation Authority, and the specific regulated activity must itself be one the scheme protects. The FSCS also notes that protection varies by product type, and some products are not protected at all.
How much is protected, and when did the limit change?
For investments, the compensation limit depends on when the firm failed. As of October 2026, according to the FSCS:
| Date the firm failed | Maximum compensation for investments |
|---|---|
| After 1 April 2019 | £85,000 per eligible person, per firm |
| 1 January 2010 to 31 March 2019 | £50,000 |
| Before 1 January 2010 | 100% of the first £30,000 and 90% of the next £20,000, up to £48,000 |
For anyone investing today, the relevant figure is the first row. The limit is £85,000 per eligible person, per firm. That wording is important, and it is where most misunderstandings arise.
Reading “per person, per firm” correctly
The limit applies to each eligible person at each authorised firm, not to each product or each fund. If a person holds several investments through the same failed firm, they share a single limit rather than each carrying its own.
Illustrative arithmetic. Suppose an investor has £120,000 of assets through one platform, and the platform fails with a shortfall that leaves the whole sum unrecoverable. The maximum compensation would be £85,000, leaving £35,000 (£120,000 minus £85,000) outside the scheme’s protection. Now suppose the same investor had split the money evenly, £60,000 at each of two separate firms, and both failed with total shortfalls. Each holding sits below £85,000, so in principle the whole £120,000 falls within the limit. The sum is the same; only the structure differs.
This is an observation about how the limit works, not a recommendation to spread money in any particular way. Most investors will never experience a platform failure, and the right structure for any individual depends on cost, convenience, tax wrappers and personal circumstances.
The picture is different for other products. For banks, building societies and credit unions that failed after 30 November 2025, the FSCS gives a deposit limit of £120,000 per eligible person, per institution. Readers weighing cash against investments may find the comparison of savings and market returns in our cash analysis a useful companion, since the two sets of protections are not identical.
Pensions and advice have their own rules
The FSCS also publishes separate figures for pension products, which investors often hold alongside other assets. After 1 April 2019, according to the scheme:
- Failure of a pension provider is protected at 100%, with no upper limit.
- Failure of a self-invested personal pension (SIPP) operator is protected up to £85,000.
- Bad pension advice is protected up to £85,000.
The contrast between a conventional provider and a SIPP operator is a useful reminder that the label on a product does not tell you the level of protection. What matters is which regulated activity failed and which firm was responsible for it.
What the scheme will not do
It helps to be blunt about the limits of protection. The FSCS will not:
- Compensate for market losses or poor performance. Falling prices are the investor’s risk.
- Cover unregulated products or activities, even if the firm is authorised for other things.
- Cover firms that are not authorised. The FCA says registered but unauthorised firms are unlikely to offer either FSCS protection or access to the Financial Ombudsman Service.
- Remove the need to read what you are buying. Higher-risk, illiquid or complex products sit squarely in the category of things where the product itself, not the firm, is the main source of risk.
That final point connects to a theme we explored in our look at private markets becoming more accessible: the more specialised and less liquid an investment, the more important it is to understand what protection actually attaches to it, and what does not.
Is the firm you are dealing with actually authorised?
Compensation rights only exist if the firm is within the regulatory perimeter, which makes the first check the most valuable. According to the FCA, the Firm Checker shows whether a firm is authorised or registered and what products or services it has permission to offer. If a firm is not authorised or lacks the right permission, the FCA advises avoiding dealing with it.
A sensible sequence, drawn from the FCA’s guidance, runs as follows:
- Search for the firm by name on the FCA Firm Checker.
- Select the specific product or service you are considering.
- Confirm that the firm is authorised and has permission for that activity.
- Check that the contact details you were given match those on the Firm Checker.
Individuals can be checked on the Financial Services Register, though the FCA notes that not everyone at a firm needs approval, so some will not appear. The Register can also show a firm’s history, including whether it was authorised when you first bought a product, along with past fines and permissions. For firms that operate through appointed representatives, the FCA says to check with the principal firm what the representative is allowed to do.
How clone firms exploit the checking habit
Checking a name is not enough if the name has been borrowed. The FCA describes clone firms as fraudsters who pretend to be from genuine authorised firms, sometimes using a real firm’s name, address or reference number, or copying its website with small changes such as a different phone number.
Warning signs the FCA lists include:
- Mismatched details, such as a different phone number or an email address from a free provider rather than the firm’s own domain.
- Unexpected contact by phone, email, newsletter or social media, or after you entered your details online while looking for an investment.
- Unusual products, including bonds, shares, foreign exchange or cryptocurrencies that are non-tradable, worthless, overpriced or non-existent.
- Claims that the FCA’s records are out of date. The FCA says it updates the Firm Checker and Register roughly every 24 hours, so this claim is unlikely to be true.
If the Firm Checker lists no contact details, or the firm says they are out of date, the FCA says to call it on 0800 111 6768. The FCA’s Warning List of unauthorised firms is useful but not exhaustive, and the absence of a firm from that list does not make it safe.
Where this fits in a wider investing picture
Protection against firm failure is one layer among several. Diversification across assets, awareness of fees, a realistic time horizon and an understanding of what each product actually is all matter at least as much for most investors. Readers who have been looking at alternatives to the familiar large-cap names might also revisit how UK investors are looking beyond the FTSE, where the question of what you hold is as important as who holds it for you.
A short conclusion on what protection can and cannot do
The FSCS is a backstop for one specific problem: a regulated firm failing and leaving an investor short. The headline figure for investments is £85,000 per eligible person, per firm, where the firm failed after 1 April 2019, and it applies to the firm rather than to each individual product. It does not touch market performance, unregulated activities or unauthorised firms. Checking authorisation before committing money, and checking that contact details match the official record, is the simplest way of making sure that backstop exists at all.
This article is general information, not personalised financial advice. Rules, limits and rates change, so check current figures with the relevant organisation before making decisions.
Sources: Financial Services Compensation Scheme; Financial Conduct Authority
