Business analyst Business insurance Profesional Service Project Management Sales Management Strategy Management

FSCS levy to soar by a third to top £1bn


The Financial Services Compensation Scheme is forecasting a levy for 2021/22 of £1.04bn, up £339m from the £700m raised the previous year due mainly to soaring numbers of claims.

The FSCS expects continuing failures in the SIPP sector and says the cost of compensating victims of the collapsed mini-bond firm London Capital & Finance is much higher than expected.

The FSCS said in its Annual Plan and Budget out today: “We expect further failures of self-invested personal pension (SIPP) operators. Claims in relation to SIPP operators are forecast to account for £336m of the Investment Provision’s anticipated £345m compensation costs. The compensation cost for this class is a significant (89%) increase on 2020/21, mainly due to expectations that firms in this sector may fail.”

Because of rising claims the FSCS will go ahead with a supplementary levy of £78m to be invoiced in February although the FSCS said this was lower than an earlier forecast of £92m.

{loadposition hidden2}

Chief executive Caroline Rainbird said: “Over the coming year, we anticipate an ongoing rise in complex pension advice claims and further failures of self-invested personal pension (SIPP) operators.

“We also forecast an increase in pay-outs for the insurance provision class due to recent failures. Furthermore, due to the widespread economic impacts of Covid-19, we are also, unfortunately, anticipating an increase in failures across the industry.

“To ensure we can pay for the anticipated increase in the volume of claims, we are currently forecasting a 2021/22 levy of £1.04bn. Given the current high levels of uncertainty, this figure is our best estimate and is subject to change. The final figure will be confirmed in our next edition of Outlook which we expect to publish by May.”

The FSCS expects management expenses and staffing costs to rise by 16% on the previous year due to a rising case load.

She said she understood industry concerns about the rapidly rising levy.

She said: “While the levy funds the compensation and services we provide, helps protect consumers, improves market stability and increases confidence in the finance sector, we appreciate that it is far too high and that increasing levy costs could put pressure on firms’ finances. I want to reassure you that we are doing everything in our power to reduce the levy which includes making recoveries from failed firms wherever possible and if cost-effective. Another way we are addressing the issue is by ensuring better outcomes for consumers and helping them make better decisions. “

The FSCS also plans a campaign to warn consumers worried about low savings rates to avoid investments offering unrealistic returns.

{loadmoduleid 456}

Source link