Wantsum Credit Union stopped trading on Monday, prompting the FSCS to promise it will compensate most of the 400 savers within seven days.

The FSCS protects up to £85,000 of savings or £170,000 for joint accounts. Since 2001 it has paid out more than £26bn in to 4.5m people.

FSCS said it will automatically send payments to members of the credit union.

People with up to a £1,000 will receive a letter to get cash over the counter at their Post Office. Anyone with more than this will receive a cheque.

Kate Bartlett, director of operations for FSCS, said: “FSCS is protecting Wantsum Credit Union members. We’re ready to help. Your savings are safe and we will get your money back to you within the next week. The process is automatic so you won’t have to apply for compensation. We will pay up to £85,000, so every member of the credit union is protected.”

Financial services firms fund FSCS through a compulsory annual levy. The Scheme protects deposits, insurance and investments when authorised firms go bust. It has the most wide ranging protection of any scheme in the world.