Savings, Money, Finance, Specialist

Financial Services and Markets Act 2000

The Act provides the framework within which a single regulator for the financial services industry, the Financial Services Authority ("the Authority"), will operate. It equips the Authority with a full range of statutory powers and creates the Financial Services and Markets Tribunal ("the Tribunal"). The Act also establishes the framework for single ombudsman and compensation schemes to provide further protection for consumers.

In 1997 significant changes were made to the UK’s regulatory framework. A single statutory body for financial regulation, the Financial Services Authority (FSA), was set up. In addition a tripartite structure for overseeing the UK financial system was established, with distinct roles for the Treasury, the Bank of England and the FSA.

The Government’s strategy for promoting saving and asset accumulation is founded on its core welfare principles:

To help deliver this strategy, the Government has continued to develop proposals and a series of saving products as part of the Saving and Assets agenda including:

introducing Individual Savings Accounts ISA's as the Government's primary vehicle for tax-free saving outside pensions. They have helped to make saving, and the benefits of saving, easier for ordinary investors to understand;
welcoming and taking forward the conclusions of the Sandler Review of Medium and Long Term Retail Savings in the UK;
consulting widely on the Pensions Green Paper proposals to enable those of working age to plan more effectively for a secure retirement; and
announcing details of the Child Trust Fund and piloting the Saving Gateway - which are designed to extend the benefits of saving and asset-ownership, especially to lower income individuals.

Financial Services and Markets Act 2000

The Financial Services Compensation Scheme (FSCS) is the UK's statutory fund of last resort for customers of authorised financial services firms. This means that FSCS can pay compensation if a firm is unable, or likely to be unable, to pay claims against it. FSCS is an independent body, set up under the Financial Services and Markets Act 2000 (FSMA). Our service is free to consumers.

What is FSCS?

FSCS is an independent body and was created under the Financial Services and Markets Act 2000 (FSMA). It became operational on 1 December 2001 when FSMA came into force. Our service is free to consumers.

They can pay compensation if a firm is unable, or likely to be unable, to pay claims against it. This will generally be because it has stopped trading and has insufficient assets to meet claims, or is in insolvency. We describe this as being in default.

What They cover

FSCS covers business conducted by firms authorised by the Financial Services Authority (FSA), the independent watchdog set up by government to regulate financial services in the UK and protect the rights of consumers. European firms (authorised by their home state regulator) that operate in the UK may also be covered.

FSCS protects:

deposits,
insurance policies,
insurance broking (for business on or after 14 January 2005),
investment business, and
mortgage advice and arranging (for business on or after 31 October 2004).

Compensation Limits

The maximum levels of compensation are:

Deposits: £31,700 per person.

100% of the first £2,000 and 90% of the next £33,000.

Investments: £48,000 per person.

100% of the first £30,000 and 90% of the next £20,000.

Mortgage advice and arranging: £48,000 per person (for business conducted on or after 31 October 2004).

100% of the first £30,000 and 90% of the next £20,000.

Long-term insurance (e.g. pensions and life assurance): unlimited.

100% of the first £2,000 plus 90% of the remainder of the claim.

General insurance: unlimited.

Compulsory insurance (e.g. third party motor): 100% of the claim. Non-compulsory insurance (e.g. home and general): 100% of the first £2,000 plus 90% of the remainder of the claim.

General insurance advice and arranging: unlimited (for business conducted on or after 14 January 2005).

100% of the first £2,000 plus 90% of the remainder of the claim. Compulsory insurance is protected in full.