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Financial Compensation - do you have a claim?

Financial services in the UK are generally very safe and reliable, but what happens when a financial services firm goes out of business owing you money?

The Financial Services Compensation Scheme (FSCS) is the UK’s statutory fund of last resort for customers of financial services firms, and can pay compensation for financial loss if an authorised financial firm can’t meet claims against it. FSCS covers deposits, insurance, investments and mortgage business.

If there something you want an answer to, from knowing how to complain about a financial services product that you think were mis-sold, or what protection FSCS can provide or how to make a claim for compensation then send your question in now to Ian Lamont and Esther Norris - and join the live online chat today from 1pm.

Host: Welcome all. Ian and Esther are now with us to answer your live questions.
Ian & Esther: Good afternoon everyone!

Monty Pylon: What is the difference between you and the FSA? Why don't they do what you do too?
Ian & Esther: FSCS only covers business conducted by firms authorised by the FSA, the independent watchdog set up by government to regulate financial services and protect customers. By law, most financial services firms in the UK must be authorised by the FSA.

Nez: How can I find out if a firm is a 'member' of FSCS?
Ian & Esther: All regulated firms are covered by the FSCS.
Esther: To check whether a firm is regulated (by which we mean authorised to trade in the financial services industry) you should check the register on the FSA website.
Ian: Visit them at www.fsa.gov.uk

Ray: Do I have to pay anything to have my claim considered by FSCS?
Esther: Our service is free to consumers. We are the UK’s independent, non-profit fund of last resort for consumers of authorised financial firms that have ceased trading.

Webmaster: How do I find out whether a firm has ceased trading?
Ian & Esther: Again, you can check on the FSA register via their website, or call their consumer helpline which is 0845 606 1234.
Esther: Or you can also call our helpline on 020 7892 7300 and we will be able to help you.

Therese: How do you decide that a company is in default and cannot pay?
Esther: We would investigate a firm’s financial position. If a firm is unable, or likely to be unable to pay the claims against it, we declare them in default.

JulianJames: What is the maximum you can repay someone who has lost their money? Is it a fixed %age or potentially all of it?
Ian & Esther: For deposits, it's all of the first £2000 and 90% of the next £33,000, meaning in total a maximum payout of £31,700. For investments - including endowments - it's all of the first £30,000 and 90% of the next £20,000, meaning in this case a maximum payout of £48,000. For insurance claims, the compensation would be all of the first £2000 and 90% of the remainder - with no upper limit.

Rubicon: Can you provie conmpensation against an online insurance company that has gone bust but not actually given advice just brokered a deal?
Ian & Esther: The first thing is to check whether the company is authorised by the FSA. If it is, then please write to us at Financial Service Compensation Scheme, 7th Floor, Lloyds Chambers, 1 Portsoken Street, London, E1 8BN or email us at: enquiries@fscs.org.uk

RobW: L&G wrote to me and advised that there would likely be an shortfall on my endowment mortgage, and that I should talk to the financial adviser that sold me the deal, not them. I cannot trace the adviser who I dealt with back in 1989 anyway so can I come to you or L&G for compensation and if so when because the mortgage is not due to complete until 2014?
Esther: You can check the FSA’s website to try and chase the financial adviser. If you find that the firm has ceased trading then contact our helpline on 0207 892 7300. alternatively fill in our online questionnaire available at www.fscs.org.uk

Bella: Help. Approx 19years ago, our soliciotor sold us an endowment policy as the best way for us to pay a mortgage. We knew absolutely nothing about mortgages, endowments, insurance, etc so trusted his judgement. We now are being told we could have a shortfall of £15,000 and it we are told we have no comeback. I am assuming it is because it was a soliciotor who sold us the policy. Can you advise please.
Many thanks. Ian & Esther: Financial regulation only really began in 1988, so it would be very unlikely that you would be able to claim compensation for something that happened before this date.
Esther: If you were sold your policy by a solicitor, they may have been regulated by the Law Society. They have their own complaints service and you can contact them via www.lawsociety.org.uk or write to them at 113 Chancery Lane, London, WC2A 1PL or phone them on 020 7242 1222.

Stevie G: Hi Ian & Esther - I have my money in a joint account in a High Street bank. Would FSCS pay compensation to both account holders if the bank failed?
Esther: The compensation limit of £31,700 applies to each depositor for the total of their deposits with an organisation, regardless of how many accounts they hold or whether they are single or joint account holder. In the case of a joint account FSCS will assume that the money in that account is split equally between account holders, unless evidence shows otherwise. This means that each account holder in a joint account would be eligible for compensation up to the maximum limit.

Chris Daniel: Are there any criteria I have to meet to qualify for help from FSCS?
Ian & Esther: Yes - the firm has to be in default, you would have to have an eligible claim under our rules and we would have to calculate that you have suffered a loss.

Bob Lancaster: I am aware that you can only pay out for firms that have gone bust. What about those firms that are technically still afloat but have tiny assets. What then? Is it back to the Ombudsma?
Ian & Esther: As per an earlier question, we described how we investigate firms that have gone out of business. If the firm is in a position to be able to meet the claims against it, you would have to pursue the firm directly.
Esther: It's worth noting that if a firm does only have tiny funds, such that we feel they may not able to meet potential claims against them, we would declare them in default. A claim through us then may be possible.

Harry: In November 2000 I had a Standard Life Endowment Policy mature, a highly successful investment. I did not require all the proceeds immediately and to retain my membership of Standard Life for what was possibly a forthcoming mutualisation of the company, I was recommended by their agent to reinvest some of the proceeds from the Endowment Policy into a With Profits Bond. I informed the agent that I did not require the funds for at least five years. I therefore invested £10,000 of the proceeds into a With Profits Bond. I am now nearly 70 and this Fund is now penalised by a Unit Price Adjustment (Market Value Adjustment) on its current valuation at 22.3.06 of £11,498.20, surrender value of £9,069.60 - hence a UPA of £2,428. This I find totally unacceptable. I have written to the company and received an answer that is not satisfactory. Have you any recommendations as to what I can do? Surely after three years of good returns, by now Standard Life should be making adjustments to their profit-making scheme.
Esther: If the firm that advised you is still trading and you have already complained to them but you are not satisfied with their response, you can take your complaint to the Financial Ombudsman Service (FOS). FOS is the independent service for resolving disputes between consumers and financial firms. Contact them on 0845 080 1800 or via their website www.financial-ombudsman.org.uk

Stan the Man: What do you know about a company called XSAVI? Have you had a lot of complaints about them?
Ian & Esther: There is a notice about this company on the FSA website - again this is at www.fsa.gov.uk
Esther: if you go the main page, then click on Library, then type in the name XSAVI, you should find the notice there.

Neighbour: Hello - my neighbour (not online) says he has waited 8 weeks for a postal reply from you. Who regulates you and what is your customer servicing policy? thanks
Esther: We are really sorry that your neighbour is still waiting for a response to his enquiry. FSCS has been inundated with enquiries recently, which has meant that sometimes consumers have had to wait longer than we would wish for a response from us. We generally aim to reply to written enquiries within 4 weeks, but the level of enquiries coming into the Scheme means that this is not possible at the moment. We should be able to respond to his enquiry within the next few weeks, but, in the meantime, please ask your neighbour to call our customer services team on 020 7892 7300.

John M: Does compensation cover any guarantees I was given?
Ian & Esther: We only compensate for actual loss incurred, as a result of negligent advice by the firm that has caused the loss. We don't pay compensation where a claim relates to the failure of an investment to match investment guarantees, or adverse market performance.

Tina: What does "default" mean?
Esther: FSCS can only help customers if a firm is unable, or likely to be unable, to pay claims against it. We describe this as being in default. This will generally be because a firm has stopped trading and has insufficient assets to meet claims, or is in insolvency. We conduct an investigation to establish this.

How much did you pay out last year?: How much did you pay out last year?
Ian & Esther: We have paid out £650million in compensation since our inception in December 2001. In the year 2004/05 we paid out £175 million. Our annual report is due to be published soon, which will give the figures for this year. Previous annual reports area available on our website www.fscs.org.uk

Jimmy Mac: What's the difference between the FSCS and the FOS? Are Ombudsman decisions binding on FSCS?
Ian & Esther: Let's quickly explain the relevant acronymns.
Ian: FSCS - we are the Financial Services Compensation Scheme and the FOS is the Financial Ombudsman Service.
Esther: FOS provides consumers with a free independent service for resolving disputes with financial firms. If a firm is still trading, you should complain directly to it. If you are not happy with how it deals with your claim and you have exhausted its complaints procedures you should contact FOS.
Ian: We - the FSCS - deal with complaints specifically relating to firms that are no longer trading and are unable or likely to be unable to meet claims made against them.
Esther: One other acronym to note is the FSA. This is the Financial Services Authority, the independent watchdog set up by the Government to regulate financial services and protect consumers. The FSCS is only able to handle claims against firms that were regulated at the time of advice.
Ian: To answer your second question, Ombudsman decisions are not binding on the FSCS. There may be other reasons that are not considered by the Ombudsman that FSCS would have to take into account. These could affect whether we are able to meet a claim. If you have a decision in your favour from the Ombudsman, and the firm you are claiming against has subsequently gone out of business, you should contact us and we will try and deal with your claim.

Will Reynolds: Will I have to pay FSCS if they consider my claim?
Ian & Esther: No, our services are free to the consumer.

Top 4 Advice: Would you agree it is probably better to only invest through big name companies, who have a track record? Seems obvious to me.
Ian & Esther: You should always deal only with authorised firms. This gives you access to the protection of the Financial Ombudsman if the firm is still trading, and FSCS if the firm can’t deal with claims itself. FSCS can only consider claims against firms that were authorised at the time the business was conducted.

duncan: I was probably missold an endowment mortgage when I remortgaged in 1992. How can I prove it - other than testify that the risks were not clearly explained to me?
Ian & Esther: You will need to back to the firm that advised you.
Esther: If you have documentary evidence that was given to you at the time this may support your claim.
Ian: If you remain unhappy with the reply you receive you can go to the Financial Ombudsman Service (FOS).

Red Ken: Can compensation for bad investment advice cover more than the sum lost so as to include a sum for the 'missed opportunity for gain' had good advice been given?
Esther: We pay compensation only for actual financial loss incurred, for example as a result of negligent advice given by the firm that has caused a loss. We don't pay compensation where a claim relates to the failure of an investment to match Investment guarantees, or adverse market performance, or hypothetical performance. Compensation aims to put you back in the position you would have been in had you not received bad advice.

Stace: I bought insurance last year through a company called Whitely Insurance Consultants - and they have gone belly-up. Can I claim for my money back that was paid to them through you or would it be quicker to go through my credit card company?
Esther: FSCS may be able to help with claims against this firm. The limit to compensation we can pay is: the first £2,000 of a loss will be met in full. FSCS can then pay 90% of the remainder of the loss. However, we can only help if business was conducted with this firm after 14th January 2005, which is the date that insurance brokers first became regulated. Please contact our Customer Services Team on 0207 892 7300 for more information or visit our website: http://www.fscs.org.uk/latest_news?Whiteley_Insurance_Consultants/

Host: That's all we have time for. Thank you to everyone for your questions. Any final points you would like to make?
Ian & Esther: Thanks for all your questions - we hope we have been able to address your queries. If you have unanswered questions please do visit our website for more information.
Esther: The FSCS website is at www.fscs.org.uk and if you do have a complaint to make, this is a good place to start. For those of you with endowment complaints you can complete our online questionnaire. Ian: Or alternatively you can call our helpline on 020 7892 7300.
Esther: Thanks everyone.

Dave: Are claims means-tested?
Ian & Esther: The simple answer to that is no!
Esther: We assess each claim on its individual merits and take into account all of the circumstances at the time of advice.

Bobby: Where does FSCS get its money from?
Ian & Esther: The FSCS is funded on a levy by financial services companies that are regulated by the FSA.
Esther: FSCS was setup by an Act of Parliament. It's independent and free to consumers. We are funded by levies that are compulsory for financial services companies

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