FSCS protection is a core tool in the adviser’s toolkit, and one that clients often misunderstand. When you are helping someone manage significant cash deposits, making sure they understand the limits and structuring deposits accordingly is good practice, and in keeping with the focus on good client outcomes under Consumer Duty.
The basics: what the FSCS covers
The Financial Services Compensation Scheme protects eligible deposits held with UK-authorised banks and building societies up to £120,000 per eligible depositor, per banking licence. For joint accounts, each holder is covered separately, so a couple can hold up to £240,000 under one licence. Temporary high balances, such as proceeds from a property sale or an inheritance, may qualify for up to £1.4 million of protection for up to six months.
Protection applies per banking licence. Several banks that operate under different names share the same licence. Halifax and Bank of Scotland, for example, share a single banking licence, so a client holding £120,000 with each has £120,000 of cover in total. The second £120,000 is unprotected.
“Protection applies per banking licence. Several brands can share one.”
Why this matters in practice
Clients with significant liquid assets are the most exposed to FSCS concentration risk. A £500,000 deposit held in a single savings account exceeds the protected limit by £380,000. If that bank failed, the unprotected amount could be lost.
The risk is real. UK bank failures are rare, but they do happen, and the reassurance that comes with full FSCS cover has tangible value for clients who have spent a lifetime building that capital.
Structuring deposits to keep them protected
The solution is straightforward: spread deposits across several banking licences so that each individual holding stays within the £120,000 limit. A client with £500,000 of deposits would need accounts under five or more licences to be fully covered.
Until recently, managing this was administratively cumbersome. A Deposit Aggregator solves it by providing access to a panel of FSCS-protected banks through a single interface.
With Bondsmith, clients hold deposits across a panel of partner banks, with separate FSCS eligibility at each bank on the panel, and full visibility of their holdings in one place.
Your role as an adviser
When a client holds more than £120,000 in deposits, it is worth documenting your advice around FSCS cover, as part of showing how you support good outcomes for them. The key steps are:
- Identify total deposits, including accounts held away from the platform.
- Map holdings against banking licences, since several brands can share one, to identify concentration.
- Recommend restructuring where total exposure under any one licence exceeds £120,000.
- Document your recommendation and the client’s decision.
Bondsmith provides savings across a panel of partner banks through a single platform, FSCS protected on eligible deposits at each bank.