The Financial Services Compensation Scheme paid out £149.47m in 2006/07 compared with £201.22m the previous year.
Eighty-eight per cent of claims related to mortgage endowments, with an average payout of £1,900, according to its annual report.
The general insurance sector saw the biggest total payouts, amounting to £65.9m compared with £93.19m the previous year.
Pension review payouts fell from £69.75m to £50.3m although the FSCS warns that big payouts are expected in 2007/08 and beyond. The average payout is currently £25,000.
Proposals to reform the FSCS, due to come into force in April 2008, will disband the pension review levy group although the FSA has yet to produce its final plans.
Investment payouts, including endowments, fell from £38.2m to £31.8m.
The FSCS is to introduce a splits’ category in 2007/08 and says the mid-point of its claims’ forecast range is around 8,000 claims relating to Exeter Fund Managers and BFS Investments.
Chief executive Loretta Minghella says: “The backlogs are all but gone and we are dealing with the majority of claims much faster and under budget.”