What Is the FSCS?
The Financial Services Compensation Scheme (FSCS) is the UK’s statutory compensation scheme for customers of FCA-authorised financial services firms. If a regulated firm fails and cannot pay claims against it, the FSCS steps in to compensate eligible customers.
For pension savers, the FSCS provides crucial protection against two main risks: the failure of a pension provider (the company that holds your pension) and the failure of a financial adviser (the person who gave you pension advice).
FSCS Coverage for Different Pension Types
| Pension Type | FSCS Cover | Limit |
|---|---|---|
| Personal pension (insurance-based) | Yes | 100%, no limit |
| Stakeholder pension | Yes | 100%, no limit |
| SIPP (operator failure) | Partial | Depends on investments |
| SIPP (underlying funds) | Yes | £85,000 per fund manager |
| Workplace DC (contract-based) | Yes | 100%, no limit |
| Workplace DB (occupational) | No — PPF covers | N/A |
| Pension advice (mis-selling) | Yes | 100%, no limit |
| State Pension | No — government backed | N/A |
Insurance-Based Pensions
Most traditional personal pensions and stakeholder pensions are insurance-based products, meaning they are managed by insurance companies regulated by the FCA. If the insurance company fails:
- The FSCS covers 100% of the value of your pension
- There is no upper limit on the amount covered
- This applies to the full value of your pension, however large
This is one of the strongest levels of financial protection available in the UK. Your pension with a mainstream insurance company (e.g., Aviva, Legal & General, Scottish Widows, Royal London) benefits from this protection.
SIPPs — More Complex Protection
Self-Invested Personal Pensions (SIPPs) have a more complicated protection picture because you choose your own investments:
SIPP Operator Failure
If the SIPP platform or operator fails, the FSCS may cover losses caused directly by the operator’s failure. However, this does not cover investment losses — only losses resulting from the firm’s insolvency or misconduct.
Underlying Investment Protection
The investments you hold within a SIPP have their own FSCS protection:
- Funds (OEICs/unit trusts): £85,000 per fund manager
- Shares and bonds: £85,000 per investment firm
- Cash deposits: £85,000 per banking licence
- Unregulated investments: Not FSCS-protected
Pension Advice Protection
If you received bad pension advice from an FCA-regulated firm and that firm has since failed:
- The FSCS covers 100% of your claim
- There is no upper limit
- This includes pension mis-selling claims for unsuitable DB transfers, SIPP advice, and other pension products
This unlimited protection for pension advice claims is particularly important given the large sums often involved in pension mis-selling cases. A DB transfer mis-selling claim could be worth £100,000 or more, and the FSCS will pay the full amount.
FSCS vs Pension Protection Fund (PPF)
The FSCS and PPF serve different purposes:
| Feature | FSCS | PPF |
|---|---|---|
| Protects | Personal pensions, SIPPs, advice | Defined benefit (DB) workplace schemes |
| Trigger | FCA-regulated firm fails | Employer becomes insolvent |
| Coverage | 100% (pensions/advice), £85k (investments) | 100% (at retirement age), 90% (below retirement age) |
| Funded by | Levy on FCA-regulated firms | Levy on DB pension schemes |
If you are a member of a defined benefit workplace pension and your employer goes bust, the PPF — not the FSCS — provides protection.
How to Make an FSCS Claim
- Check eligibility: Confirm the failed firm was FCA-regulated and your claim type is covered
- Gather documentation: Collect pension statements, advice letters, and evidence of loss
- Submit your claim: Apply through the FSCS website, by phone, or by post
- FSCS investigates: They will review your claim and may request additional information
- Receive compensation: If approved, compensation is typically paid within a few months for straightforward claims
You do not need to use a claims management company — the FSCS process is free and designed to be accessible.
How to Protect Yourself
- Always check that any pension provider or adviser is on the FCA Register
- Avoid unregulated investments within SIPPs
- Diversify across different fund managers if you have a large SIPP (to maximise the £85,000 per manager protection)
- Keep all pension documentation, statements, and advice letters
- If in doubt, seek pension advice from a regulated adviser