Financial Services Compensation Scheme (FSCS) New Limits

Submitted by qrops on Mon, 04/Jan/2010

The Financial Services Compensation Scheme (FSCS) has issued a reminder that from 1st January the compensation limits for investment, insurance and home finance intermediation claims are changing.

This is a vital piece of protection for UK consumers. The default of Lehman Brothers probably the most recent high profile investment claim shows the importance of this scheme in both protecting consumers and maintaining confidence in the UK financial services industry.

Important though, you are only protected when using a UK authorised and regulated by the Financial Services Authority firm. With the opening of European boarders to financial services business a firm may be authorised by passport of services to the UK. This does not mean regulated by the UK FSA and does not afford protection from the FSCS.

Many offshore advisory firms extol the virtues of their UK trained advisers but that means nothing if things go wrong – and they do!

With the surge of individuals leaving the UK for offshore residency it is essential to ask your adviser searching questions about how you are protected. What regulator covers the advice and what compensation schemes exist? Professional insurance is a requirement but if you would have to seek redress through a foreign court then caveat emptor. Remember advice is a professional service however friendly the meetings and discussions become.

The FSCS new limits will apply to claims against firms declared in default on or after 1st January 2010 as announced by the FSA earlier this year.

According to the scheme, the new limits will make it easier for consumers to understand the cover the FSCS provides.

Overview of the new limits applying to eligible claims:

  • Investments: Provision and mediation of investments protection for 100 per cent of £50,000.

 

  • Home finance mediation: Advising on or arranging house purchase finance: protection for 100 per cent of £50,000.

 

  • Insurance Business: Non-compulsory insurance provision (both general and life insurance) protection for 90 per cent of the claim, with no upper limit.

 

  • General Insurance intermediation: Non-compulsory general insurance and pure protection contracts (for example, term, critical illness and income protection insurance) protection for 90 per cent of the claim, with no upper limit.