FSCS levies advisers £100m and warns of more to come

Mark-Neale-at-office-in-2014-700.jpg

The Financial Services Compensation Scheme will levy life and pensions advisers £100m for 2017/18 and has warned firms to brace themselves for a further levy later in the year.

In its latest Outlook update, published today, the FSCS says it has reduced its expectations of costs for Sipp-related claims, bringing down its forecast from £163m in January to £146m. The average forecast claim value has fallen from £36,000 to £32,000.

FSCS chief executive Mark Neale says: “In view of the volatility of these claims, we plan to raise an initial levy to the limit of £100m.

“This means that we begin the year with the risk of a supplementary levy later in the year which, if it became necessary, would result in costs falling on other sectors through the retail pool.”

Investment advisers will pay a levy of £88m, up £4m from the estimate in January.

Overall the FSCS will raise £363m through industry levies, an 8 per cent increase from 2016/17.

Neale adds: “As we saw in 2016/17, when we were obliged to raise three supplementary levies but were also able to make a substantial return of funds to investment advisers, much can happen during the year for better or worse. We do not have 20/20 vision.”

He says the levy numbers have been published against the backdrop of the FCA’s ongoing review into FSCS funding.

He says: “Those issues are not simply about how to share FSCS’s costs fairly across the industry, important though that is. The paper considers the interaction between FSCS protection and firms’ own professional indemnity insurance cover, so that FSCS is the last, not first, resort. And it considers the scope of FSCS protection and the limits on compensation, including for retirement savings, where currently different limits can apply.

“I strongly encourage all those with an interest in these issues to continue to engage with this review.”