What does the Financial Services Compensation Scheme (FSCS) do?

The Financial Services Compensation Scheme (FSCS) plays a crucial role in protecting consumers in the UK by providing compensation to customers of authorized financial services firms that have failed. This safety net is particularly important in the event that a financial institution goes bankrupt or is unable to meet its obligations to customers. The FSCS covers various types of financial services, including deposits, investments, and insurance, ensuring that individuals can recover a portion of their lost funds up to certain limits. By doing so, the FSCS helps to maintain confidence in the financial system, reassuring consumers that their savings and investments are protected even in the face of a firm’s failure.

Understanding the function of the FSCS is key for individuals when assessing the safety and reliability of financial service providers. Its primary focus is consumer protection rather than regulation of markets, offering advice, or managing tax revenue, which distinguishes it from other financial entities and services.