What Is the FSCS?
The Financial Services Compensation Scheme is the UK’s statutory deposit insurance and investor compensation scheme. They allow you to retrieve lost money when authorised financial services companies go bankrupt.
The FSCS operates independently, and there is no fee for using its services. The organisation was set up under the Financial Services and Markets Act 2000. Also, the Financial Conduct Authority has created the scheme rules for the FSCS.
The organisation was formed in 2001, and its headquarters are in London. They have an annual budget of 79.6 million GBP based on 2019-2020 figures. The current agency executives are Marshal Bailey (Chairman) and Caroline Rainbird (Chief Executive Officer).
The FSCS receives its funding through levies from the Financial Conduct Authority and Prudential Regulation Authority. The costs that they incur include compensation payments and management expenses.
What Is the FSCS Responsible For?
This section covers the responsibilities of the FSCS so you can better understand how they are relevant to customers of money transfer companies. You will learn why they are an essential organisation in the UK financial markets.
Insures depositors: the primary role of the FSCS is to protect financial institutions that go bankrupt. Therefore if you are using the services of a money transfer company that goes under, you can file a claim with the FSCS to get lost funds back.
Accept claims: the FSCS is responsible for accepting claims from the general public relating to lost funds from authorised financial services firms. Therefore, they need to look at the details of each case and process them promptly.
Compensation payouts: the organisation ensures that depositors receive the funds they are entitled to through compensation. The FSCS is partly funded for the reason of being able to compensate consumers that have lost money because financial services firms go under.
The limits of the FSCS responsibilities are laid out on the compensation limits page of their website. Also, people can discover what makes them eligible to receive compensation. The maximum amount that each person can receive is 85,000 GBP per bank, building society or credit union. For joint accounts, the maximum compensation amount is 170,000 GBP.
The FSCS only pays out money when the firm in question cannot pay themselves, which means they are in default. The FSCS will investigate the financial status of the firm. The organisation was created primarily to help private individuals, but in some cases also covers small businesses.
What Is the Importance of the FSCS?
Now we will take a closer look at why the work done by the FSCS is important. This lets you put things into perspective and have more confidence in the UK’s money transfer industry.
Recovers lost money: depositors can have peace of mind that at least 85,000 GBP of their deposits at each financial institution will get recovered by the FSCS via a compensation payout. This means they can deposit money without fear of losing their life savings. However, depositors should check if they are eligible and if the financial institution where they deposited is included in the scheme.
Improves trust and confidence: the FSCS acts as a last resort option for depositors who wish to get their money back once their financial institution cannot pay back the funds. Therefore, the general public is more willing to deposit money with banks, which improves the economy as a whole. In addition, it allows banks to use the money to provide mortgages, which is vital for new homeowners.
Helps small businesses: the FSCS is generally set up to assist private individuals but can also be a lifeline to some small businesses. Since cash flow is vital to small businesses, the FSCS can be the solution that keeps them afloat if they have chosen the wrong financial institution to hold money.
This section is an overview of the regulations, crimes and industries that relate to the FSCS. This enables you to quickly understand what the FSCS is about and understand its limitations.
Regulations: the FSCS was set up under the Financial Services and Markets Act 2000. This gives them the power to offer the compensation scheme to the general public. Also, their scheme's rules were created by the Financial Conduct Authority, one of the top UK regulators.
Crimes: the FSCS does not deal with any crimes in the financial industry. They only deal with claims regarding compensation payouts for money that cannot be paid back by financial institutions.
Industries: the FSCS is limited to financial institutions active in the UK economy. The type of deposits covered by the scheme includes mortgage arrangements, mortgages, investments, insurance brokering and regular currency accounts.
Accountability: the FCA appointed the board members of the FSCS, so they are accountable to the regulator.
What Regions does the FSCS cover?
The FSCS is set up only to serve the UK’s general public and provide insurance on money deposited in UK-based financial institutions. This might include international companies, but they must also provide services in the UK.
When Might You Encounter the Financial Services Compensation Scheme?
You will encounter the FSCS when the financial institution where you have deposited money defaults. This means they can no longer pay out the money you are owed. In such instances, you can turn to the FSCS for help with receiving compensation.
However, remember that the maximum compensation payout is 85,000 GBP and 170,000 GBP for joint accounts.
Can the FSCS make New Rules?
The FSCS does not have the power to make new rules since they are not a regulator. Their purpose is to receive claims for compensation when a financial institution defaults. However, the Financial Conduct Authority is the regulator in charge of the FSCS and has the power to make new rules.
How to Contact the FSCS
This section reveals the contact details for the FSCS, which can be used when you want to claim compensation. This will be handy for consumers of money transfer services that want to retrieve lost money.
Email: to send the FSCS an email, you must fill out the form on their official website.
Phone: their general enquiries number is 0800 678 1100. The international number is +44 207 741 4100.
Social media: you can also connect with the FSCS on their social media profiles, which include Facebook, Twitter, Instagram and LinkedIn.
To conclude, the FSCS is essential for ensuring that depositors of financial institutions can receive compensation for lost money. Depositors might have no clue that their financial institution is about to go bankrupt, but having the security blanket of the FSCS provides trust in the UK’s financial systems. This is excellent news for money transfer customers that want to send money to a UK bank.
We encourage our visitors to learn more about the process of transferring funds to the UK by reading the other guides on our website. You can start with Send Money To the UK and Send Money to the USA from the United Kingdom. Reading these guides will equip you with the most competitive money transfer companies in the industry.