When people choose a place to save their money, one of the most important questions they ask is:
“What happens if my bank, building society, or credit union goes out of business?”
The answer is often the Financial Services Compensation Scheme (FSCS).
The FSCS provides an important safety net for savers across the UK, giving people confidence that their money is protected if an authorised financial institution fails.
In this piece in our What is? series we’ll explain what the Financial Services Compensation Scheme is, how it works, and what it means for members of Wave Community Bank.
What is the Financial Services Compensation Scheme?
The Financial Services Compensation Scheme (FSCS) is the UK’s statutory compensation scheme for customers of authorised financial services firms.
Established in 2001, the FSCS was created to protect consumers and maintain confidence in the financial system. It acts as a fund of last resort, stepping in when authorised firms are unable to meet their financial obligations. The scheme covers a range of financial products and services, including savings accounts, current accounts, insurance, investments, and mortgages.
For most savers, the FSCS is best known for protecting money held in savings accounts.
How does the FSCS work?
If a bank, building society, or credit union authorised by the Prudential Regulation Authority (PRA) and regulated by the Financial Conduct Authority (FCA) fails, the FSCS may compensate eligible customers. For savings deposits, the FSCS currently protects up to £120,000 per eligible person, per authorised financial institution.
This means that if an authorised institution were to cease trading and could not return customers’ savings, the FSCS would step in and compensate eligible savers up to the protection limit. The process is usually automatic, meaning customers typically do not need to submit a claim for standard savings accounts.
Are credit unions covered by the FSCS?
Yes.
Many people are surprised to learn that credit unions are covered by the Financial Services Compensation Scheme in exactly the same way as banks and building societies. This means that eligible savings held with an authorised UK credit union are protected up to the FSCS limit of £120,000.
For members of Wave Community Bank, this provides an additional layer of reassurance alongside the many benefits of being part of a member-owned financial co-operative.
What does this mean for Wave Community Bank members?
Wave Community Bank is an authorised credit union serving people across East Sussex, Kent, Medway and Bexley. As a regulated credit union, eligible deposits held by members are protected by the FSCS. This means that if our credit union were ever unable to meet its obligations, members’ eligible savings would be protected up to the applicable FSCS compensation limits.
For many savers, this can come as a welcome surprise. Some people mistakenly believe that only large high-street banks offer protected savings. In reality, credit unions benefit from the same FSCS protection while also delivering a more community-focused approach to finance.
Why is FSCS protection important?
Financial protection helps build trust and confidence. When you save money, you want to know it is being held securely. The FSCS exists to provide reassurance that, in the unlikely event that an authorised financial institution fails, eligible savers will not lose their money up to the compensation limit.
This protection has become an important part of the UK’s financial system and helps millions of people save with confidence. For those considering joining a credit union for the first time, understanding FSCS protection can remove one of the biggest barriers to opening an account.
Why choose a credit union?
While FSCS protection is important, it’s only one reason why many people choose a credit union. Credit unions are different from traditional banks because they are not-for-profit financial co-operatives. Rather than focusing on generating profits for external shareholders, they exist to benefit their members.
At our credit union members can save regularly, access affordable loans, and receive support that helps them build long-term financial resilience. Because the organisation is member-owned, its success is shared amongst the people who use it. This community-first approach is one of the reasons why credit unions continue to grow in popularity across the UK.
Many members value the combination of:
- FSCS-protected savings
- Ethical and community-focused financial services
- Affordable borrowing options
- Encouragement to develop healthy saving habits
- Personal service from a trusted local organisation
Is my money safe in a credit union?
This is one of the most common questions people ask.
The simple answer is that authorised credit unions are highly regulated financial institutions. They are subject to oversight by both the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA).
In addition, eligible savings are protected by the Financial Services Compensation Scheme.
This means that when you save with Wave Community Bank, your money benefits from the same FSCS protection available to savers at banks and building societies.
The bottom line
The Financial Services Compensation Scheme is a vital part of the UK’s financial safety framework. It protects eligible savings up to £120,000 per person, per authorised institution and provides reassurance that customers’ money is protected if a regulated firm fails.
Importantly, this protection applies to credit unions as well as banks and building societies. For members of Wave Community Bank, this means you can enjoy the benefits of saving with a community-focused, member-owned financial co-operative while knowing that your eligible savings are protected by the FSCS.
If you’re looking for a safe, ethical and local way to save and borrow, Wave Community Bank combines the security of FSCS protection with a commitment to helping people across East Sussex, Kent, Medway and Bexley build a better financial future.
Key takeaway: Eligible savings with Wave Community Bank are protected by the Financial Services Compensation Scheme (FSCS) up to £120,000, giving members the confidence to save with a trusted, community-based credit union.