Compensation if you’ve lost money through mis-selling

Mis-selling means all or any of these things:

• You were given unsuitable advice.
• The risks weren't explained to you.
• You weren't given the information you needed and ended up with a product that wasn’t right for you.

Under the rules set out by the Financial Conduct Authority (FCA), financial services must be sold to you in a way that's “fair, clear and not misleading”.

The Financial Services Compensation Scheme aims to help cover people who have suffered financial losses when a firm has gone out of business.

The scheme can pay compensation up to certain limits if you lose money when one of the following goes bust:

• bank
• building society
• credit union
• financial adviser or other financial go-between
• insurance company
• investment company.

It also looks at cases where you've been sold the wrong kind of product and lost money, but the person or company that gave you the advice has gone out of business.

Here we explain what to do if you've lost out because you've been:

• mis-sold a mortgage
• mis-sold insurance
• given poor investment advice or your investments have been mismanaged.

You’re not covered by the Financial Services Compensation Scheme if:

• the company responsible is still in business – you must complain to them first and then take your case to the Financial Ombudsman Service if you’re not satisfied
• the company wasn't authorised by the Prudential Regulation Authority (PRA) or the Financial Conduct Authority (FCA) – see the next section of this guide for how to check this
• the company was based overseas – although some European financial services companies are still covered
• the investment simply didn’t perform well, unless it was mis-sold or you were given misleading advice about how it would perform.

You can claim compensation from the Financial Services Compensation Scheme if you've been mis-sold a general insurance policy and the company that sold it to you has gone bust. General insurance refers to products including travel, home, motor, pet, protection and health insurance.

Mis-selling is when you’re sold a policy that's unsuitable for you.

An insurance company or adviser might be guilty of mis-selling if they:

• sell you insurance that includes cover for redundancy when you’re out of work, retired or self-employed – this might mean any claim would probably be turned down
• sell you a policy, such as travel insurance, that you weren’t eligible for, due to reasons such as your age or where you live.

You might also be able to make a claim under the scheme if:

• your financial adviser or insurance broker owed you money from a claim that was settled by the insurance company but the adviser or broker didn’t pass the money on to you and they've since gone bust
• you gave your adviser the money for your insurance premium and they went out of business before it was paid over to the insurance company
• you were a victim of fraud – for example, if the adviser told you the premiums were higher than they really were and kept the difference.

Some types of insurance are not covered by the scheme.

These include:

• reinsurance
• credit insurance
• marine insurance
• aviation insurance
• transport business insurance.

The Financial Services Compensation Scheme doesn’t cover claims against advisers or brokers based in the Channel Islands or Isle of Man.

That depends on the kind of insurance your claim is for.

For compulsory insurance like third-party car insurance, you might get back the full amount of the value of the claim.  Other types of insurance where you could get 100% of your claim paid to you include annuities, whole of life assurance and income protection insurance. You can find more information on the FSCS websiteOpens in a new window

For other kinds of insurance like house contents cover, the Financial Services Compensation Scheme can pay 90% of the value of the claim.

For example, if you lost £200 then the maximum compensation the scheme could pay would be £180.

There is no limit to what will be paid out but you can only get 90% of any eligible claim.

If you’ve been given bad advice about a mortgage and the firm that gave you advice has gone out of business, the Financial Services Compensation Scheme might be able to pay you compensation for any loss you have suffered because of the bad advice. Buy-to-let mortgages and loans secured on your property are not covered by the FSCS. 

You might be able to claim if, for example:

• you were advised to ‘self-certify’ your income and got a more expensive mortgage than you needed
• you were sold a mortgage that wasn’t suitable for you at the time because you weren’t advised properly about what was available
• you were sold a mortgage that you would still be paying when you retired and the adviser didn’t check that you’d be able to keep up repayments
• you were advised to switch mortgages but weren’t given an adequate explanation of why you should switch, and the advice to switch resulted in you losing money.

The scheme can only pay out for financial loss and the maximum you can get depends on when the firm involved went bust and was ‘declared in default’ by the scheme.

• Declared in default on or after 1 April 2019 – the scheme can pay up to £85,000 per eligible person for your mortgage mis-selling claims against one firm.
• Declared in default between 1 January 2010 and 31 March 2019 – the scheme can pay a maximum of £50,000 for your mortgage mis-selling claims against one firm.
• Declared in default before 1 January 2010 – the scheme can pay the first £30,000 and 90% of the next £20,000, up to a maximum of £48,000 of your mortgage mis-selling claims against one firm. For example, if you lost £30,000 you might get it all back, but if you lost £45,000 you might get only £43,500 back.

You can claim from the Financial Services Compensation Scheme if you’ve lost money because of poor investment advice about:

• managed funds
• stocks and shares
• personal pension plans
• long-term investments like mortgage endowments.

You would only apply to the scheme if the company that gave you the advice has gone out of business.

If this isn’t the case, it might be a good idea to talk to the company itself first.

You're not entitled to compensation just because an investment performs badly or you lose money.

Your loss must be because of any of the following:

• bad or misleading advice
• negligent management of investments
• fraud or misrepresentation (for example, if you were told the investment was a particular kind of investment and it was something else and you relied on what you were told when buying the investment).

If you asked for an investment with a very low risk of losing your money and your adviser recommended a high-risk investment, you might have a claim for compensation if you lost money as a result.

But if you deliberately took on a high-risk investment and then lost some of your money, you wouldn't have a claim.

The scheme will only pay out for financial loss and the maximum you can get depends on when the firm involved went bust and was ‘declared in default’ by the Financial Services Compensation Scheme.

• Declared in default on or after 1 April 2019 – the scheme can pay a maximum of £85,000 per eligible person per firm for mis-selling claims.
• Declared in default between 1 January 2010 and 31 March 2019 – the scheme can pay a maximum of £50,000 for mis-selling claims against one firm.
• Declared in default before 1 January 2010 – the scheme can pay the first £30,000 and 90% of the next £20,000, up to a maximum of £48,000 of a mis-selling claim against one firm. For example, if you lost £30,000 you might get it all back, but if you lost £45,000 you might get only £43,500 back.

If the firm that you dealt with was authorised by the FCA or PRA and has gone out of business, you can claim compensation for any money owed to you from the Financial Services Compensation Scheme.

You can make a claim online on the Financial Services Compensation Scheme’s website or print off the documents and post them back.

You should also register a claim with the insolvency practitioner – such as an administrator or liquidator – who is responsible for the company that you dealt with.

You can also claim compensation if your bank, building society or credit union were to go bust – or if your insurance or pension provider went bust.

It’s free to make a claim with the Financial Services Compensation Scheme. But some companies will offer to help you make a claim and charge you a fee. This can be as much as a quarter of your compensation plus VAT. For example, if you got £2,000 back, you could end up paying the company as much as £600.