Compensation for failed investments to rise to £85k

Investors who lose out when firms go bust could now receive up to £35,000 more compensation under plans unveiled by the City watchdog.

The Financial Conduct Authority ( FCA) is raising the limit for Financial Services Compensation Scheme ( FSCS) payouts from £50,000 to £85,000. It will apply to claims made against failed investment firms, advisers, mortgage brokers and debt management firms.

However, investors will have to wait until next year for confirmation of the changes.

The higher compensation cap would bring protection against these types of losses into line with the cover given for bank deposits where the bank fails and cannot return customers’ money.

Compensation for deposits was raised earlier this year in line with the falling value of the pound after the Brexit referendum.

Compensation limits mits are set per individual, per firm m and per claim type. So £100,000 spread equally across two investment ent firms is completely protected ed under current rules. But £100,000 held with one firm is only covered up to £50,000. 000.

Telegraph Money has highlighted before how investors can be left ft short when a firm fails.

Reader Emma Scowen’s (pictured) ) mother lost £117,000 as a result of a bond investment, but was only awarded £50,000 because the adviser who made the recommendation had since shut down.

The FCA argued the limits should be raised because, for instance, most people only use one financial adviser, meaning they would lose out disproportionately if that adviser went out of business.

Providers must be registered with the FCA if customers are to be protected by FSCS cover.

You can find a full list of firms registered with the FCA on its website.

The paper also reconfirms the regulator’s stance that loan-based crowdfunding, commonly known as “peer to peer” lending, is unchanged and FSCS protection will not be extended into this fledgling area.

To make a claim against firms that have not gone bust, yo you should contact the Financial Ombudsman O Service. The Ombu Ombudsman can order compensati compensation for losses of up to £150,00 £150,000. Interest and other costs may m be added on top of this.

It is only whe where a company has failed and been b declared in default th that investors can turn t to the Financi Financial Services Compe Compensation Schem Scheme for help.