The Financial Services Compensation Scheme (FSCS) is a UK statutory compensation scheme that provides protection to consumers in the event that a financial services firm becomes insolvent or is unable to fulfil its obligations.
It is designed to safeguard individuals' savings and investments and provide reassurance in the financial services sector.
For instance, imagine you have a savings account with a UK bank that is a member of the FSCS. If the bank encounters financial difficulties and is unable to repay your savings, the FSCS steps in to provide compensation.
The scheme protects eligible individuals up to a certain limit, which is currently £85,000 per person, per financial institution. So, if you have savings up to £85,000 in a bank that becomes insolvent, the FSCS would reimburse you for the full amount.
The FSCS aims to play a crucial role in maintaining trust and confidence in the financial system.