£4M earmarked to repay Keydata cash

The Financial Services Compensation Scheme has set aside nearly £4m from its budget for next year to recover the cost of compensating Keydata investors.

Last week, the FSCS published its plan and budget for 2012/13.

The proposed budget for the scheme’s management expenses, which is separate to compensation costs, is £65.2m, an 11 per cent increase from its £59m budget last year.

Out of the total budget, £3.9m has been set aside for professional and legal expenses for pursuing recoveries, for example, from Keydata.

The scheme estimates that it will have paid 3,996 Keydata claims in 2011/12, and forecasts it will receive between 160 and 1,260 new Keydata claims over the next year.

In October, law firm Herbert Smith wrote to IFAs who sold Keydata products on behalf of the FSCS to begin the legal process of recouping money paid out to Keydata investors.

The FSCS says it expects to incur “substantial continuing legal costs in pursuing recoveries, in particular following the failure of Keydata”.

It adds: “We are claiming significant recoveries from both the Lifemark entity and claims against the adviser firms. However, we do not currently forecast receiving any such recoveries in 2012/13.”

Last April, the FSCS recouped £28m from Norwich & Peterborough Building Society which was paid in compensation to N&P Keydata customers.