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Split-cap levy on way for 2007/08

By James Salmon

A split-cap levy from the Financial Services Compensation Scheme looks increasingly likely in 2007/08 but there is continued uncertainty over the volume and value of claims.

The FSCS’s half-year report reveals it has received 13,000 mortgage endowment claims in the six months, in line with forecasts for the year of 26,000.

But pension review claims confounded expectations, with the scheme receiving 400 claims in the first half compared with predictions of 350 for the year.

The FSCS says it expects to raise a split-cap levy in 2007/08 but it is unlikely to include it in its announcements for the next year due to uncertainty over the volume and value of claims.

Insolvency practitioners are continuing to work with BFS Investments and Exeter Fund Managers, the two main defunct firms involved in the splits’ debacle. The FSCS says early indications from Exeter’s administrator, PricewaterhouseCoopers, indicate it has received around 4,000 complaints. It says both Exeter and BFS are unlikely to have sufficient assets to meet total claims against them.

The FSCS says levy hikes will primarily affect fund companies rather than IFAs. A spokeman says: “It is clear we will need a levy for splits some time during 2007/08. When the costs begin to crystallise, we will give as much notice as possible of potential levy implications and the timing of any levy call.”

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