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Compensation Limits

The changes, which came into effect in 1 January 2013, mean the compensation limit for investments, home finance advice and deposits will be the same at £50,000 and all claims for non-compulsory insurance will be paid at 90%, with no upper limit.

Investments

Provision and mediation of investments: protection for 100% of £50,000 (currently 100% of the first £30,000 and 90% of the next £20,000).

Home finance mediation

Advising on or arranging house purchase finance: protection for 100% of £50,000 (currently 100% of the first £30,000 and 90% of the next £20,000).

Insurance

Non-compulsory insurance provision (both general and life insurance): protection for 90% of the claim, with no upper limit (currently 100% of the first £2,000 and 90% of the remainder, with no upper limit).

Mediation of non-compulsory general insurance and pure protection contracts (term, critical illness and income protection insurance): protection for 90% of the claim, with no upper limit (currently 100% of the first £2,000 and 90% of the remainder, with no upper limit).

There will be no change to compulsory insurance, such as motor third party and employers’ liability insurance, including mediation. This will remain at 100% protection with no upper limit.

What is the position for people who have multiple accounts with banks that are subsidiaries of another bank?

For people who hold multiple accounts in banks that are part of a larger group, if each of the banks is separately authorised by the Financial Services Authority: FSCS would pay compensation up to the limit of £50,000 per person, per authorised institution. If each of the banks is not separately authorised but is covered by the parent company’s authorisation: FSCS would pay compensation up to the limit of £50,000 once, irrespective of how many different institutions a person held accounts with.

The Financial Conduct Authority changed the rules that govern compensation payments on 1 October 2007. For deposit claims against firms declared in default before 1 October 2007, the maximum level of compensation is £31,700 (100% of £2,000 and 90% of the next £33,000).

Depositors may still receive a share of their savings following any distribution of assets as part of the insolvency process for a failed bank. This would be a matter for the insolvency practitioner to determine and any recovery would, by necessity, vary according to the circumstances of the specific failure. The actual level of compensation you receive will depend on the basis of your claim. FSCS only pays compensation for financial loss.

Compensation limits are per person (per firm and type of claim). Slightly different limits and rules apply if you have a claim against an insurer or a bank that was insolvent before FSCS became operational (1 December 2001), or if your claim is against an investment firm that was declared in default before FSCS became operational.

If you have a question about how a bank or building society is authorised, please contact the Financial Services Authority Consumer Contact Centre on 0845 606 1234

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