Key takeaways
- FSCS pays out when an authorised firm fails, not when the value of what you hold falls. The cover is £120,000 for deposits and £85,000 for investments.
- Deposits and investments run under separate rulebooks. The deposit limit rose to £120,000 on 1 December 2025; every other FSCS limit, investments included, was left where it was.
- The £120,000 applies per authorised firm, not per brand. HSBC, first direct and fd share one banking licence, so money spread across all three counts once.
- Shares held in a broker's nominee company are not the broker's property. They are usually returned rather than compensated, and the £85,000 caps shortfalls and transfer costs instead.
- At WealthTek, FSCS capped payments at £85,000 per client inclusive of transfer costs, and the FCA has since secured over £57m for those clients from three other firms.
FSCS pays out when a firm fails, not when an investment falls
If your bank collapses, or the broker holding your ISA goes into administration, what actually comes back to you? Here's the answer, and it's narrower than most people assume. The Financial Services Compensation Scheme pays out when a UK-authorised firm fails and can't return what it owes you. It doesn't pay out when the thing you bought loses value.
FSCS puts it in one line on its own investments page: "We can't accept any claims that are for poor investment performance - unfortunately, the nature of investments means their value can go down as well as up." That sentence is the whole distinction. A failed firm is a claim. A failed investment isn't.
Two limits follow from it, and they aren't the same number. Money held with a UK-authorised bank, building society or credit union is covered up to £120,000 per eligible person, per firm. Investments are covered up to £85,000 per eligible person, per firm. One scheme name, two separate rulebooks, and a £35,000 gap between them.
Only the deposit limit moved in 2025, and everything else stayed put
The deposit figure changed recently, which is why the number you half-remember is probably the old one. Since 1 December 2025 it has been £120,000 per eligible person, per authorised firm. From January 2017 until then it was £85,000. FSCS lists the earlier limits at the foot of its deposit page, and they have moved down as well as up.
The Prudential Regulation Authority sets that limit and has to review it at least every five years. Its November 2025 policy statement shows the working. The regulator had consulted on £110,000, then went higher: "Based on the September 2025 CPI (the latest available monthly figure), £85,000 in January 2017 has increased to £116,770 in real terms." Rounded to the nearest £10,000, that produced £120,000.
What matters more to an investor is what didn't move. FSCS answers that one directly: "No, only our deposits and savings limit (savings in banks, building societies and credit unions) has increased to £120,000 per person. All our other protection limits on pensions, investments, insurance, mortgages, PPI, debt management and funeral plans remain unchanged at the same levels." The chart above puts those limits side by side. Deposits are the outlier. Almost everything else sits at £85,000.
The limit follows the banking licence, not the brand on the app
Here's where careful people lose money. Splitting cash across two banks feels like doubling the cover. It isn't, if the two banks share one authorisation.
FSCS is blunt about it: "This is important because FSCS protection for banks, building societies and credit unions is up to £120,000 per person per banking licence." Its own worked example is HSBC, which "also uses the names fd, first direct, first direct bank and fd bank, meaning they all, plus HSBC, share a banking licence." Nationwide is the other case FSCS names, listing Derbyshire Building Society, Cheshire Building Society and Dunfermline Building Society among the brands sitting under a single licence.
The arithmetic is unforgiving. Put £120,000 with first direct and another £120,000 with HSBC, and the whole combined exposure sits against one licence, of which £120,000 is covered. Checking costs nothing: the Financial Services Register lists the trading names each authorised firm uses. The check matters most once the cash balance is large, and how large an emergency fund needs to be turns on income volatility rather than a fixed number of months. Whether you keep that map in a spreadsheet or in LedgerTouch, the unit that matters is the licence, not the logo.
A house sale buys you six months at £1.4 million, and only for listed events
Sell a house and your current account holds a number it has never held before. FSCS covers that situation separately, under what it calls a temporary high balance — a balance that is unusually large because of a specific life event, rather than because you saved hard. "In most cases, FSCS can protect temporary high balances up to £1.4 million for six months."
The conditions are tight. The clock starts when the money becomes legally transferable to you, and moving it to another bank doesn't restart it. The qualifying events are listed: sale of a main home, inheritance, insurance payouts, redundancy, divorce, retirement benefits, compensation claims. Second homes don't qualify — "Property transactions must relate to your main residence." Personal injury, disability and incapacity claims carry no limit at all.
Six months is short if you're between a completion and a decision. That's when where emergency cash sits stops being a question about yield and becomes one about who's holding it.
Your shares aren't on the broker's balance sheet — they're in a nominee company
Ask what happens to a share portfolio when the broker fails, and the honest answer is that the shares were never the broker's to lose. Under the FCA's client assets rules, a firm holding your investments must "make adequate arrangements so as to safeguard clients' ownership rights, especially in the event of the firm's insolvency, and to prevent the use of safe custody assets belonging to a client on the firm's own account except with the client's express consent."
Legal title goes either into your own name or into "a nominee company which is controlled by" the firm, an affiliate, an exchange or an approved third party. A nominee company is a shell whose only job is to be the registered holder while you keep the beneficial ownership — the economic interest, the dividends, the right to sell. It exists so that the firm's creditors can't reach your holdings.
That is why the £85,000 limit isn't a ceiling on the size of a portfolio the scheme can rescue. Assets held properly aren't compensated at all. They're returned.
What creditors can't touch, the administration can still charge for
This is the part almost nobody knows about, and it's where the £85,000 actually does its work. Returning client assets costs money, and under the special administration regime that cost comes out of the client assets themselves. FSCS describes the mechanism plainly: "the costs incurred by the administrators in reuniting investors with their assets and money must be funded out of the remaining assets and money of the failed firms' clients."
So the deduction is real, and the compensation limit is what absorbs it. FSCS "protects eligible customers by paying their share of the costs of transferring their assets to a new firm, up to the FSCS limit of £85,000 per eligible customer", and covers genuine shortfalls in the assets within the same limit. When Beaufort Asset Clearing Services went into special administration in 2018, that arrangement is what let most clients get their portfolios back intact. FSCS describes the usual result: compensation "will allow the administrators to transfer investors' assets and money whole, without deductions, to a new firm, which investors then have access to."
Read against the sticker price of investing, that is a cost line nobody quotes you. It sits alongside the custody and FX charges you can at least see in advance.
The strongest objection: for most investors the £85,000 never bites
There's a serious case that this framing overstates the danger, and it deserves its best shot. If custody assets are returned rather than compensated, then the size of your portfolio is close to irrelevant. A large ISA at a failed broker isn't a capped claim. It's a transfer to another broker, paid for by the scheme.
The objection is largely right, and the public record supports it. In the routine failure the administrator moves the book to a new firm, FSCS meets the transfer costs, and the client ends up with a new account rather than a cheque. Most people never touch the limit at all.
Where it breaks is where the records were wrong. The £85,000 is a backstop against shortfall — assets a firm said it was holding and wasn't. If the books are accurate, the limit is close to academic. If they aren't, it's the only thing between you and the loss, and it is not indexed to the size of your account.
WealthTek is the case where £85,000 stopped being enough
WealthTek was an FCA-authorised wealth manager put into special administration in 2023 after the regulator applied to court. The FCA has since charged its former principal partner with multiple criminal offences, including fraud and money laundering. A trial is listed for 2027, so the charges are untested until then.
FSCS's update on the case is worth reading twice. "The maximum amount payable to eligible WealthTek customers is £85,000 per client, inclusive of the cost contribution." And then, without softening it: "We recognise that many clients may have lost more than £85,000 and will not have been fully compensated following the completion of this process."
The rest of the recovery has come from somewhere else entirely. In June 2026 the FCA censured CACEIS UK, WealthTek's sub-custodian, which agreed to a £31.7m voluntary payment for clients. "The FCA has now secured over £57m in total for WealthTek clients in just over a year, with action taken against CACEIS UK, Sapia Partners and Barclays Bank UK." That money reaches clients through the administrators, not through the compensation limit. No rule entitled them to it, and no rule guarantees the next set of clients anything similar.
The list of things FSCS doesn't cover is longer than the list it does
Poor performance is the headline exclusion, but it isn't the only one. FSCS also says it "cannot compensate clients for losses from an inability to sell assets or settle transactions during the Special Administration" — so the weeks when your account is frozen and the market moves against you are your weeks, not the scheme's.
Authorisation is the second filter, and it has two parts rather than one. The firm must be authorised, and the specific activity must be regulated. FSCS spells out the second condition: "Be aware that the particular activity (such as providing advice) that the authorised firm is carrying out for you must be regulated by the PRA or the FCA for FSCS protection to apply." A firm can be perfectly genuine, and the thing it did for you can still fall outside.
Appointed representatives are the trap inside that. An appointed representative acts on behalf of an authorised principal, and the FCA's own guidance warns that where the representative goes beyond what the principal permitted, the compensation scheme may not be available. The FCA also lists whole categories outside the scheme: "Some firms and activities aren't covered by the FSCS (for example, high-cost short-term credit, money held with e-money institutions, authorised payment institutions and small payment institutions)." Money sitting in an e-money wallet is not a protected deposit, whatever the app implies.
The limitations of everything above
These are rules, not outcomes. The limits are exact; what you'd actually recover isn't, and the published material can't tell you.
The sample of UK firm failures is small, and each one turns on the quality of the failed firm's records. FSCS says as much about temporary high balances — it "cannot confirm protection until a firm fails and evidence is reviewed." Timing is unpredictable too. SVS Securities failed in 2019 and FSCS was still working through its stockbroking claims in late 2024, five years later, hampered by what it called the firm's poor record keeping.
Eligibility is narrower than "per person" suggests. Some corporate claimants are excluded, and at Beaufort the FCA noted that ineligible corporate clients had to pay the distribution costs themselves. This piece describes the position for eligible individuals, which is not everyone.
And one asymmetry has no published explanation. The deposit limit has just been uprated for inflation. The investment limit has sat at £85,000 since 2019, through the same inflation, and nothing in the material sets out why the two should diverge.
What would change this
The deposit limit sits on a statutory review cycle — the PRA has to revisit it at least every five years, and it has just demonstrated that it will move the figure when inflation says so. £120,000 has a shelf life, and a figure carried around without a date ages badly.
The investment limit belongs to the FCA rather than the PRA. If the same inflation logic were ever applied to £85,000, the gap between the two schemes narrows and the distinction in this piece gets less dramatic. Nothing published says that's coming.
The event that would test all of it hasn't happened. The cases on the public record so far have involved firms whose client books could be moved to another broker. A large custodian failing with a genuine shortfall across a big retail register would be the first real read on whether £85,000 is a backstop or a rounding error. Until then, the useful thing to check isn't the limit. It's which legal entity on the Financial Services Register actually holds your assets, and whether it's the same one holding your cash.