FSCS breaks down a £40m interim levy to hit advisers
Advisers could be hit with an interim levy of £40m to cover investment failures from 2011, the Financial Services Compensation Scheme has announced.
The bill is a part of a £221m levy for the financial services industry, slightly up on £217m for last year.
The interim levy money will cover the cost of compensating investors in products such as the failed Keydata Lifemark funds, as well as UK clients of stockbroker Wills & Co.
Investment advisers could face a levy of £33m while mortgage intermediaries could face a £5m bill, the FSCS said.
Those involved in life and pensions intermediation could receive a £18m levy.
Mark Neale, chief executive for FSCS, said: “A major focus for us in the coming year will be to pursue recoveries from major failures in order to reduce the costs on the industry. The existence of FSCS and its ability to respond to unpredictable workloads contributes to financial stability. That is why it is important for FSCS to invest in order to enhance its capacity to deal with large or multiple failures.”
Details were announced in its report, Plan and Budget: 2012/2013, which added that none of its expense or levy estimates includes any allowance for MF Global.
However, it added that the FSCS is working closely with the administrators, KPMG, who are in the process of reconciling the client accounts. It added that until this exercise is complete, it will not know how much compensation is likely to be payable or when.
The 29-page document said that during 2012/2013, the FSCS is expecting the overall volume of new claims it receives to be about 32,350 which it says is broadly the same as 2011/2012 when the figure stood at 27,800.
However, the document added that a large proportion of the annual levy, £120m, would fall to the insurance sector, mainly due to an increase in payment protection insurance claims.
The FSCS said it expected PPI claims to be the most significant area of growth in 2012/2013.
More than three-quarters of all the PPI claims the FSCS receives come from claims management companies, which charge consumers up to 25 per cent of their compensation in fees, it added.
The FSCS said it would review its claims and funding assumptions and announce the 2012/2013 levy at the end of March.
