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FSCS reduces levy by £2.4m

The industry faces a smaller than expected bill for the Financial Services Compensation Scheme this year after its refined its claims and compensation projections.

The total levy requirement for 2008/09 of £131.7m is £900,000 higher than the original forecast due to a projec- ted increase in claims on split caps and mortgages.

However, the industry’s initial net levy of £28.3m in new money is £2.4m less than the original estimate of £30.7m.

The FSCS says that the overall reduction in the industry’s net total bill reflects the transitional arrangements for the new funding system, which came into effect this month.

It estimates that it will have total closing fund balances of £103.4m at the end of the financial year, which is slightly higher than anticipated.

Chief executive Loretta Minghella says the levy ref- lects a range of factors, inclu- ding a tailing off of mortgage endowment and pension rev-iew claims.

She says: “The lower number of claims coming in means that the FSCS does not need to levy the industry for as much in new money as in previous years. That will prov- ide 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. Mortgage endowment and pension review claims are on a sustained downward trend.”

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