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FSCS burden to remain high

Financial Services Compensation Scheme levies will remain high for advisers next year but there is a drop in the burden for the levy group containing the bulk of advisers.
Contribution group A13, for brokers that do not hold client monies, will see a £5.1m year on year reduction in its 2007/08 levy from £47.1m to £42m.
Group A12, for brokers holding client monies, sees a dramatic increase in the levy from £1.5m to £11.2m.
FSCS spokeswoman Heather Tilson says endowment mortgage complaints are still the main reason for the high figures with the drop in A13 and rise in A12 down to a greater number of complaints coming from larger firms.
The pensions review levy sees an expected dramatic rise, almost doubling from £24.8m to £47.5m.
Aifa is still in dispute with the FSCS claiming the organisation is acting outside its jurisdiction by paying old pension review claims Aifa believes would be thrown out under general law.
The FSCS says a split cap levy looks set to be introduced in 2007 but due to the fact Exeter Fund Managers and BFS Investments are yet to go into default it is too early to estimate costs.
It says the majority of the burden will fall on fund manger and managers of AUTs but advisers are also likely to bear some of the costs.
The overall industry levy will rise 29 per cent from £74.8m to £104.6m according to FSCS’s projections. The levies will be formalised in March.
FSCS chief executive Loretta Minghella says: “2007/08 will be a year of further process improvements to minimise waiting times and increase efficiency, which benefits all our stakeholders. Our core budget reflects a modest increase over 2006/07 in terms of management costs whilst anticipating a significant increase in claims output.”

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