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FSCS levy set at £131.7m

The Financial Services Compensation Scheme has set its levy for 2008/09 at £131.7m, with the industry set to pay an initial net levy of £28.3m in new money.

The FSCS says this reduces the overall bill to the industry by £2.4m from the original estimate of £30.7m, published in the FSCS Plan and Budget 2008/09.

The total levy requirement for the year shows an increase of £0.9m from original forecasts in February, which the FSCS says is due to a projected increase in the cost of splits claims and claims against mortgage advisers.

The FSCS says the overall reduction in the industry’s net total bill reflects the transitional arrangements for the new funding system, which came into effect on 1 April 2008.

Funds held at 31 March 2008 will go back to firms as credit or debit notes as part of the transitional arrangements. FSCS estimates that it will have total closing fund balances of £103.4m at the end of the financial year, slightly higher than previously anticipated.

FSCS chief executive Loretta Minghella says: “This levy reflects a range of factors including a tailing off of mortgage endowment and pensions review claims. The lower number of claims coming in means that FSCS does not need to levy the industry for as much in ‘new money’ as in previous years. That will provide some welcome news to the industry.

“The current main drivers of FSCS compensation costs include insurance claims, mortgage endowment claims that are slowing, splits and a less predictable flow of other investment and deposit claims. Both mortgage endowments and pension review claims are on a sustained downward trend.”

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