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FSCS sets investment adviser levy at £105m for next year

Investment advisers face a Financial Services Compensation Scheme annual levy of £105m for next year while life and pensions advisers are set to see their annual levy triple from £13m to £40m.

The FSCS published its plan and budget for 2014/15 this week.

The investment intermediation levy compares to an annual levy of £78m for 2013/14, but the FSCS also expects to raise a £30m interim levy on investment advisers before the end of the financial year, taking costs for 2013/14 to £108m.

It means 2014/15 will be the third consecutive year in which investment advisers have paid £100m or more in compensation costs.

Between 2009/10 and 2014/15, investment advisers will have paid a total of £511.1m.

The annual claims limit rose from £100m to £150m in January 2013. 

The 2014/15 levy is the first to be calculated under the FSCS’s new 36-month funding approach, which it says will reduce the volatility of annual levies.

It has therefore based levy calculations for each class on the average compensation costs over the past three years, except for life and pensions intermediaries, because it says the level of claims in this class is rising.

The FSCS says it has seen an increase in pension claims, including claims relating to Sipps, and expects more in this area in future.

In 2014/15, financial services firms will pay a total levy bill of £313m, which compares to levies so far in 2013/14 of £285m, excluding the £30m interim levy for investment advisers.

The FSCS expects the overall volume of new claims to be 20 per cent higher in 2014/15, increasing from 28,052 in 2013/14 to 34,724.

Philip J Milton & Company managing director Philip Milton says: “With improved regulation the FSCS should be diminishing its exposure to claims, not increasing it.”

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