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FSA/PN/054/2009
24 April 2009

The Financial Services Authority (FSA) is to go ahead with proposed changes to the compensation limits for insurance, investment and home finance advice business in the event of a firm failing, designed to achieve greater simplicity and consistency in the Financial Services Compensation Scheme (FSCS).

Jon Pain, managing director of retail markets at the FSA, said:

"The changes will help consumers understand and have confidence in the protection provided by the FSCS.  In particular it removes the current potentially confusing provisions under which some parts of a claim can be paid out at 100% and other parts at 90%."

The changes, which come into effect from 1 January 2010, 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.

Notes for editors

1. PS 09/7 'Financial Services Compensation Scheme: Review of limits' can be found on the FSA website.  The changes to compensation limits were proposed in CP 08/15  published in October 2008.
2. The current limit for insurance and investments has been in force since 30 November 2001 and for home finance advice since 31 October 2004.
3. The FSCS is funded by the financial services industry.  The FSA as regulator is responsible for setting the compensation and eligibility limits that apply to the FSCS. 
4. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.
5. The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.