The Financial Services Compensation Scheme has announced that any recoveries relating to Keydata compensation will first go to investment fund managers rather than advisers.
The FSCS has decided to refund fund managers ahead of IFAs in order to repay the cross-subsidy triggered by the £326m interim levy, mainly to cover the costs relating to Keydata unit Lifemark, announced in January.
Advisers have had to pay a £93m interim levy towards these costs.
It follows the news that Norwich & Peterborough Building Society is to repay the FSCS for payments the scheme has already made to N&P customers who invested in Keydata products.
N&P has set aside £57m to repay customers who invested in Keydata products through the society, including the payments the FSCS has already made.
The FSCS has also announced that the FSCS annual levy for 2011/12 is lower than previously estimated, as tipped this morning by Money Marketing.
The total levy for 2011/12 has gone down from the indicative £240m levy bill announced in February to £217m.
Investment intermediaries will now face an annual FSCS levy for 2011/12 of £34m compared to the £40m estimated in February, and up from £20.3m the previous year.
But the levy for life and pensions intermediaries has increased from £10.5m to £21.5m, to reflect the reallocation of compensation costs based on updated analysis of claims paid to date.
The FSCS says the life and pensions intermediary levy has risen as it expects claims relating to mortgage endowments and pensions to continue.
Analysis of claims paid to date in 2010/11 shows that a greater proportion of claims came from life and pensions intermediation activities rather than investment intermediaries than in previous years.
FSCS chairman David Hall says: “There is no one right answer to the funding issues raised by Keydata. The costs of failure must be pooled across the industry if the FSCS is to meet its obligations to consumers, and those costs can in turn be redistributed, but not reduced or avoided.
“The FSCS and the FSA recognise however the importance of taking into account the widest range of industry views and settling a future approach to funding which commands the widest possible support.”
Hall adds that the review of the FSCS funding model will take place as soon as European legislation sets out whether the current ’pay as you go’ levy system can continue, or whether a pre-funded model will have to be adopted instead.
The FSA has timetabled the FSCS funding review for Q3/Q4 this year.