Over 4.5 million forced to use financial safety net

More than 4.5 million have been forced to turn to the Financial Services Compensation Scheme in the last decade after losing money in collapsed banks and financial advisers.

The FSCS has refunded almost £26bn as 2,528 financial firms have gone bust since it was set up in 2001. These include high-profile collapses such as the former building society Bradford & Bingley, which went bust at the height of the credit crunch, hitting 3.6 million savers. But the scheme also acts when credit unions or financial advisers go out of business, sometimes affecting only a handful of folk.

Most of the collapsed outfits are financial advisers, with more than 2,000 disappearing in the last 10 years. However, the majority of the big money payouts happened at the height of the credit crunch, in autumn 2008.

The FSCS pays compensation if an authorised firm cannot pay claims against it. It raises cash through a compulsory levy on financial firms.

The amount of savers' money protected under the scheme is now £85,000, while the average payout is £13,942.

Mark Neale, chief executive of the FSCS, said: "We have paid out compensation to people who had nowhere else to turn."

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

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