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FSCS says it could cut 27m fund levy

The Financial Services Compensation Scheme has admitted it could reduce the massive 27m split-cap levy on fund management firms after protests from the Investment Management Association.

The FSCS has proposed the figure to meet the liabilities of the split-cap debacle but the IMA says the FSCS has a responsibility to use its power to impose levies only if it has reasonable grounds for believing it needs to raise additional funds. It thinks the 27m involves a series of assumptions about events that may not happen.

The FSCS has responded by assuring firms that it is not looking to build up a fund for future years and that it is open to making changes when levies are set in March, hinting at a possible climbdown.

FSCS chief executive Loretta Minghella says: “I am sure that most people appreciate that FSCS has access to sensitive, confidential information and uses this to assist it in forecasting claims. If the information available to us at the time of fixing the levy suggests it would be unreasonable to levy at the levels indicated in January, we will make the necessary adjustments.”

IMA chief executive Richard Saunders says: “It is not necessary for the FSCS to be raising this levy at this stage. It is too soon to say that there will be a surge of compensation awards in the coming year. It would make more sense for the FSCS to await real evidence of eligible claims before deciding whether it needs to raise additional funds from our members.”

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