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FSCS reveals huge adviser levies (plus risk of more)

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.”


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There are 14 comments at the moment, we would love to hear your opinion too.

  1. Enough is enough now, we really do need firm and coordinated action to prevent good quality firms from going under due to these massive hikes in costs.

    How do the FSCS think small firms who have a clean bill of health can afford to pay these fees? Why should they and why should consumers ultimately pick up the bill?

    Sick of it.

  2. Hmm… well if you invite everyone for dinner, don’t get surprised when they show up! All more reason to sign up for the petition to properly and fairly categorise in the right subclass. Please sign up!

  3. More of the same and dreadful, for all the reasons previously widely documented
    But does anyone know why the Life and Pension Intermediation estimate has gone up so much? None of the cases quoted in the article relate to that category do they?

  4. I wish someone would explain to me why as a protection only advisor I have to keep shelling out money to pay for the various cockups and swindles the investment industry keeps thinking up… I advise on totally different products and the FSA doesnt want me to breathe a word about investments but the FSCS insist I carry the can for these shysters… enough is enough …let the investment advisors carry the load for their hare brained schemes…

  5. Not only an increase in the levy due to claims but an increase of 10% in the FSCS expenses! Whose money do they think it is that they are spending?

  6. Worldspreads, a spreadbetting firm!! Why in the name of all that is holy, am I – a one man band GP type IFA – paying a penalty for the activities of a spreadbetting firm?
    It is bad enough trying to justify to the mrs why I am paying out for Arch Cru and Keydata, let alone this other rubbish. Whatever happened to buyer beware?

  7. Reading this, I have the same ghastly feeling as someone in a lifeboat, holed below the waterline, plus great white shark circling me…….
    How long before it’s all over and will it hurt when I’m dragged below the water?

  8. Spent most of the day revising for R04

    Glad I checked my e-maiils,

    Have a great weekend !! love FSCS X

  9. FSA fails to regulate the banks, UK economy tips into crisis. Economic activity falters badly. Result: More financial burdens on IFA’s.

    Unbridled profligacy on the part of the FSA continues unabated. Levies continue to rise (without consultation) way above inflation. Result: More financial burdens on IFA’s.

    MAS is launched (without consultation). Result: More financial burdens on IFA’s.

    By way of more hindsight reviews, the FSA dumps onto IFA’s the consequences of its own failures to avert one motorway pile-up after another. Result: More financial burdens on IFA’s.

    PI insurers start to withdraw from the IFA market, market hardens, premiums and excesses rise. Result: More financial burdens on IFA’s.

    By some unfathomably perverted and twisted line of reasoning, the FSA decrees that every provider to have failed was, somehow or other, an intermediary. Yet more additional levies are imposed by the FSCS. Result: More financial burdens on IFA’s.

    Estimated cost of implementing the FSA’s RDR nudges past the £2Bn mark (more than triple the original estimate). Result: More financial burdens on IFA’s.

    Yet Hector Sants would have us believe that the FSA has no prejudicial agenda against the IFA community. No, of course not. How could we ever suspect such a thing? One wonders, though, just how much worse for IFA’s things could possibly be if it did.

  10. Neil Liversidge 29th April 2012 at 1:50 pm

    Howsabout the FSA bonus pool is debited as well? They were charged with regulating the failed businesses. When do they start paying for their failures?

  11. Neil Liversidge 29th April 2012 at 1:53 pm

    Chris above makes a good point. Why the hell are spreadbetting firms included in the FSCS? We might as well start contributing all those who backed the wrong horse in the Grand National.

  12. This is absolute madness.

    The FSCS and the FSA are criminally insane.

  13. The Public School twits are at it again.

  14. The FCS is a socialist pipe dream — the government waves a magic wand and consumers are compensated – by other consumers!!!!!!!

    The whole thing stinks.

    Now, look lively, me hearties! The Cap’n wants to go water skiing.

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