The Financial Services Compensation Scheme (FSCS) has confirmed its levy for 2020/21.
FSCS will levy firms £649m this year, £14m more than was forecast in its Plan and Budget 2020/21 that was published in mid-January. This includes an amount of £74.7m for management expenses which are the costs of running the scheme, it said..
The main change in the compensation forecast since the indicative levy was announced in the Plan and Budget, is the inclusion of £44m to cover estimated compensation costs for London Capital and Finance (LCF). This will be attributed to the Life Distribution and Investment Intermediation Class.
However, savings in other classes (mainly Deposits and General Insurance Distribution) mean that the overall increase from the January indicative levy is £14m.
Whilst FSCS is continuing to see an increase in pension related claims, FSCS has reduced its forecast outlined in the January Plan and Budget for SIPP operator claims by £7m. This is due to a revision in the anticipated timing and cost of some recent and expected future SIPP operator failures.
Caroline Rainbird, FSCS CEO, said: “We publish this outlook during what is an extremely challenging time for everyone, and we appreciate that the impact of COVID-19 is likely to be felt for a considerable period of time. Although the pandemic has altered FSCS’s working practices, it has not impacted on the day to day delivery of our service, and we have continued our business as usual. However, we recognise that business as usual will not be possible for everyone and that some may face challenges due to the current economic situation.
“The overall increase in the FSCS levy since the January forecast partly reflects the ongoing progress we are making in relation to the LCF failure. As we announced earlier this month, we have now started the process of reviewing individual LCF claims relating to misleading advice. Whilst it is too early to say how many LCF customers will be eligible for compensation, for the purpose of the levy we have estimated an amount of £44m.
“We know that the industry has expressed concerns about the rising trends in compensation costs and increased levy amounts. I would like to reassure our levy payers that we are working with the industry and regulators to do as much as we can to address these concerns and will keep our levy payers updated on our progress. “