What protection scheme does the Financial Services Compensation Scheme (FSCS) operate?

What protection scheme does the Financial Services Compensation Scheme (FSCS) operate?

• A. Pension protection scheme
• B. Insurance protection scheme
• C. Investor protection scheme
• D. Depositor protection scheme

Answer: (D)

The FSCS protects customers when a financial firm fails, and its depositor protection scheme specifically safeguards cash deposits in banks, building societies, and credit unions. If the institution fails, eligible depositors are paid compensation by the FSCS up to the applicable limit, so ordinary savers don’t lose their money overnight. Pension protection isn’t provided by the FSCS—that’s handled by the Pension Protection Fund for defined benefit schemes. The FSCS does offer protection for certain investments and some insurance claims as well, but the clear, direct role described here is safeguarding depositors.

The FSCS protects customers when a financial firm fails, and its depositor protection scheme specifically safeguards cash deposits in banks, building societies, and credit unions. If the institution fails, eligible depositors are paid compensation by the FSCS up to the applicable limit, so ordinary savers don’t lose their money overnight. Pension protection isn’t provided by the FSCS—that’s handled by the Pension Protection Fund for defined benefit schemes. The FSCS does offer protection for certain investments and some insurance claims as well, but the clear, direct role described here is safeguarding depositors.