The Financial Services Compensation Scheme, which pays out when regulated financial firms go bust leaving the public out of pocket, has drastically scaled back the levy it was planning to charge the industry after howls of protest from the industry.
Having paid out huge sums due to financial scandals such as London Capital & Finance and bad advice from pensions transfer firms, the FSCS had warned the industry that it would have to levy £1.04 billion on the industry.
However, today, it slashed that by £206 million to £833 million. That is still up £133 million on the previous year.
The reason for the lower than expected cash call was that the FSCS still has some of its pot of money left over for the current year.
This was put down to two factors: first, the extension of government support schemes meant some firms that looked likely to fail this year could now collapse next year instead.
Second, claims for bad advice from a number of collapsed Self Invested Personal Pension operators were now likely to be paid next year rather than this year.
The levy is still sharply up on the previous year because of bigger claims arising from the life insurance and investment intermediaries and failures of SIPP operators.
Caroline Rainbird, chief executive of FSCS, said: “While it may be welcome news to see a lower forecast than announced in January, we do not call this a successful outcome or ‘good news’. There is still a chance that these re-forecasted failures could occur in the years ahead. We also appreciate the levy, even at this updated forecast of £833m, is too high and the cost could put pressure on firms’ finances.”
The FSCS is attempting to ease the burden by defering an element of the payment.
Some firms having to pay the levy say it is unfair that they are being forced to pay up for what they argue is the failure of the Financial Conduct Authority to prevent rogue behaviour.