Financial compensation payments increase

Image caption There are various levels of compensation available through the FSCS scheme

Claims for compensation from those who had savings or investments with collapsed financial businesses rose by 25% in 2010-11.

There were 39,500 new claims from consumers to the Financial Services Compensation Scheme (FSCS), its annual report showed.

It paid out £535m, driven partly by the failure of Keydata and as a result of payment protection insurance claims.

Payments are made to cover savers' losses up to set limits.

Full compensation up to £85,000 per saver, per authorised institution is paid to those who deposit money in an authorised bank or building society if it goes bust.

For investment products, the first £50,000 is covered per person, per firm.


Some 27,000 of the claims made in 2010-11 were the result of the failure of Keydata. The investment firm was closed down by the City watchdog - the Financial Services Authority - in 2009.

The collapse has become the biggest problem yet for the FSCS which has paid out £214m to Keydata investors in the last financial year.

The scheme is expecting a large volume of claims relating to payment protection insurance (PPI) in the coming year, after 20% of new claims in the last financial year were about PPI.

Some sellers of the loan insurance - which in many cases was mis-sold - subsequently went bust, leading to the claims.

The FSCS has a target of paying compensation to depositors when a bank, building society or credit union goes bust within seven days, although the legal requirement is within 20 working days.

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