Lesson 7.5 · 5 of 5 · Tax, pensions and protection where you live
FSCS protection in the UK: what happens if your broker goes bust
If a UK broker fails, your shares and cash should come back to you, because the FCA requires them to be kept separate from the firm’s own money. If anything is missing, the FSCS pays up to £85,000 per person, per firm. Bank deposits are protected up to £120,000. Falls in price are never covered.
Terms in this lesson
- Investor compensation scheme
- The protection that returns your cash and shares, up to a limit, if your broker goes bankrupt.
- Broker
- The firm through which you buy and sell stocks, ETFs and other investments.
- CFD
- A contract with your broker that pays or charges you the price move, without owning the asset.
- Crypto exchange
- The website or app where you buy and sell crypto with dollars, euros or other currencies.
Opening question
Your FCA-authorised broker goes bust. Your shares, worth £60,000, were held for you separately from the broker’s own assets. What normally happens?
Client assets do not belong to the broker, so its creditors cannot take them. The administrators return them or transfer them to another firm, which can take months. The FSCS is for a shortfall, when something is missing.
It does not matter if you get it wrong: trying first helps you remember.
Client money and assets: how UK brokers must keep them separate
Definition
What does “segregated” mean?
Your money and shares are kept apart from the firm’s own.
The FCA’s client assets rules, known as CASS, require firms to hold client money in separate client bank accounts and to keep a record of exactly which investments belong to which client. If the firm fails, these do not go to its creditors.
- The broker failsadministrators take over and trading usually stops for a while
- Client assets are identifiedusing the firm’s records of what each client owns
- Assets are returned or transferredto you or to another broker; this can take weeks or months
- Any shortfall goes to the FSCSif records were wrong or money is missing, up to £85,000
FSCS investment protection: what it covers
Example
How much is covered?
Up to £85,000 per person, per firm.
The Financial Services Compensation Scheme (investor compensation scheme) can pay if an FCA- or PRA-authorised investment firm fails and money or investments it held for you are missing. It can also pay for bad investment advice if the firm that gave it has failed. The limit covers all your claims against that firm together, including what you hold in an ISA there.
Limits for firms that fail now.
Check yourself
A UK broker fails in 2026. The administrators find that £120,000 of the investments it held for you is missing. With the FSCS investment limit of £85,000, how much can the FSCS pay you?
How sure are you?
The investment limit is £85,000 per person, per firm. The £120,000 limit is for bank deposits, not investments. Holdings well above the limit are one reason some people use more than one broker.
FSCS deposit protection for bank accounts
| Situation | What the FSCS protects |
|---|---|
| Your money at one bank or building society | up to £120,000 per person |
| Joint account | up to £120,000 for each account holder |
| Banks in the same group sharing one banking licence | one limit across all of them |
| Temporary high balance, for example after selling a home | up to £1,400,000 for six months, if it qualifies |
The deposit limit rose from £85,000 to £120,000 on 1 December 2025. NS&I savings are backed by HM Treasury instead.
Work it out
In 2026 you have £50,000 in your own account and a £200,000 joint account with your partner, both at the same bank. The FSCS limit is £120,000 per person, per bank, and joint accounts count half each. How much of your money is protected if the bank fails, in pounds?
A hint
Your share of the joint account is £100,000. Add your own account.
Your money at that bank: £50,000 + £100,000 = £150,000. The limit is per person, per bank, so £120,000 is protected and £30,000 is not. Your partner has a separate £120,000 limit for their £100,000.
What the FSCS does not cover
If your shares or funds fall in value, nobody compensates you. The FSCS covers firms that fail, not investments that do badly.
Most cryptoassets are not regulated, and the FSCS cannot help if a crypto exchange that holds them goes bust.
Losses from trading CFDs are never covered. Some trading apps also sign you up with an entity outside the UK, where the FSCS does not apply.
Myth or fact?
“My stocks and shares ISA is FSCS-protected, so if the market falls 30% I can claim the loss back.”
This exercise is in the free account, where we also save your progress.
Create a free accountMyth or fact?
“If the app I use is not authorised by the FCA, I can still go to the FSCS when it disappears with my money.”
This exercise is in the free account, where we also save your progress.
Create a free accountWhat would you do?
You have £160,000 in cash at one bank after selling some shares, and £90,000 of investments at one broker. What do you do?
This exercise is in the free account, where we also save your progress.
Create a free accountWhat you learned
- UK brokers must keep client money and investments separate, so they should come back to you if the firm fails.
- The FSCS covers a shortfall at a failed investment firm up to £85,000, and bank deposits up to £120,000.
- Market falls, most crypto, CFD trading losses and unauthorised or overseas firms are not covered.
One more time
The questions you got wrong, asked a different way.
Check yourself
Which FSCS limit applies to a shortfall at a failed investment firm?
Investments: £85,000 per firm. Deposits: £120,000 per bank. The £1.4 million figure is for temporary high balances in bank accounts.
You reached the end
Keep what you learned
With a free account we remember your lessons, bring back the questions you got wrong exactly when you need them and keep your streak.
Save your progress with a free accountLessons are educational. They are not a recommendation to buy or sell. Investing involves risk and you can lose money. Sources: FSCS, Investments and Banks and building societies; FSCS, Cryptoassets; FCA, How to check a firm or individual is authorised; FCA Handbook, CASS 6 and CASS 7 (client assets and client money rules). Limits checked on 29 October 2026; for your own case, check fscs.org.uk or the FCA register.