The Financial Services Compensation Scheme has confirmed its levies for 2012/2013 which will see investment intermediaries contribute £78m and life and pensions intermediaries contribute £46m, with both sub-classes at risk of further additional costs.
The FSCS has today set its 2012/13 levy at £265m, £44m more than its initial proposal, with the scheme warning that further costs relating to MF Global and spread-betting firm Worldspreads could lead to additional levies for investment firms (see full breakdown of levies in the table below).
The FSCS indicated earlier this month that advisers would face an increase of £38.3m on top of the initial estimated levy of £33m to pay for the failures of MF Global and Arch Cru.
The FSCS has also revealed that the fund management sub-class was rebated £35.3m from recoveries from intermediaries who sold Keydata products, mostly Norwich & Peterborough, with the intermediary sub-class rebated £1.9m.
However, an estimated £56m of credit notes caused by the recalculation of tariffs, indicated by the FSCS last year and mostly due to fund management firms, will lead to an overall deficit of around £20m, with £17m levied on fund groups and £3m on intermediaries.
FSCS management expenses will increase to £65.2m for 2012/13, an increase on the £59m levied the previous year.
FSCS chief executive Mark Neale says: “We know that the levy will be unwelcome news for firms during tough times. But the increase in levies in some areas follow a thorough review of claims coming in and those we can reasonably expect in 2012/13.
“We shall also do everything we can to offset the costs of compensation for the industry by maximising recoveries from failed businesses and third parties who were also responsible for consumers’ losses. The levy announced today assumes that we shall recover £20.45m in 2012/13.”
Aifa policy director Chris Hannant says: “This levy is another blow to advisers who have been hit hard by compensation scheme levies. The figure reinforces the message that there are a number of fundamental flaws that leave the current scheme unfit for purpose.
“Something has gone very wrong with FSCS funding and the onerous burden it has become for the sector.”