Pension advisers’ FSCS levy triples to £119m following Sipp claims

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The Financial Services Compensation Scheme levy for life and pensions advisers increased by £85m in the year ending 31 March 2016.

According to its annual report, the FSCS received a £119.4m levy from life and pensions advisers for the year ended 31 March 2016 ( 2015: £34.5m) and a £115.7m levy from investment advisers (2015: £112.2m).

The organisation says the increase in the life and pensions levy was due to an increase in Sipp claims. Over the course of the year, the FSCS paid out nearly £77m in compensation related to Sipp claims.

The FSCS paid out £77m to consumers with claims against investment financial advisers that stopped trading in 2015/16.

Claims against the life and pensions advice sector totalled £84m, which was an increase from £35m the previous year.

The increase was due to the average pay-out against advisers that recommended Sipp investments rising year-on-year from £29,500 to £38,600.

Advisers in the life and pensions funding class had 3,948 new claims made against them, which was down from 4,442 the previous year. The average pay-out in this class was £34,254.16 – more than double the average payout in 2014/15 of £16,375.22.

Those in the investment advice funding class received 16,256 new claims, which was an increase from 9,049 the prior year. The average pay-out in this class decreased from £19,450.20 in 2014/15 to £6,832.58 last year.

The FSCS recovered £130m last year in relation to the collapse of Keydata.

FSCS chief executive Mark Neale says: “The cost of running FSCS is down by almost eight per cent, which is good news for the financial services industry that funds it. Management expenses were £66m in 2015/16, compared with £71.5m in the previous year.”