Investment advisers’ annual levy for the Financial Services Compensation Scheme next year will be higher than was quoted in January, but intermediaries have escaped more than three-quarters of an expected £30m interim charge that was put on hold last month.
In January the scheme told investment intermediaries they would have to pay a £30m interim levy before the end of the 2013/2014 financial year, to pay claims relating to the collapse of Catalyst Investment Group and stockbroker Fyshe Horton Finney.
At the same time, the FSCS forecast an annual levy for the sector of £105m for 2014/2015, part of an overall funding requirement of £313m.
In March, the proposed interim levy that would have landed before the end of the last financial year was scrapped, as the compensation scheme revealed the claims that this related to would not fall until after the first quarter. This raised the prospect that annual levies for the coming year would increase by £30m.
However, revealing the final annual levy figure this morning (15 April), the scheme has said advisers will pay £112m. This is £7m higher than the figure proposed in January, or just 23 per cent of the potential top-up.
Many in the sector will remain angry, however, that claims for Catalyst are falling on intermediaries when they assert claims should in fact fall on product providers.
Investment advisers were one of only two sub-classes to see an increase in the annual levy compared to January estimates, as the FSCS announced it will collect a total of £37m less than it had projected.
The 2014 to 2015 levy will be £276m, down from £313m in the FSCS plan and budget for the year.
The FSCS revised its demand for cash as it predicted PPI claims may have peaked last year and be set on a downward trend. This reduction in claims meant a much lower bill for insurance intermediaries, with the final levy for the sector at £38m.
Fund managers were told they will receive a rebate from the FSCS as a result of successful recoveries by the scheme relating to the failure of Keydata. Investment intermediaries and home finance intermediation were told they would see their final levies for the year increase.
Mark Neale, chief executive of FSCS, said: “There is good news today for many firms. Our overall levy for the coming year is down from earlier indications. That partly reflects an expectation of lower claims volumes.
“But fund managers and investment intermediaries are also benefiting from our success in making recoveries. We have secured many millions of pounds for them and will continue to pursue recoveries wherever it is cost-effective to do so.”
The FSCS annual levies have increased this year to reflect a new 36-month funding approach, which is designed to give greater foresight on the amount of money the scheme will need and remove the need for interim levies.
Chris Hannant, director general of the Association of Professional Financial Advisers, previously said the bill for advisers under the old system for 2014/2015 would have been £76m, some £36m less than the revised figure.
However, he said he was optimistic that in the long run advisers would avoid paying an interim levy and therefore that costs would be lowered in the long term.
Mr Hannant said: “Under this new approach, the FSCS is more likely to ‘over-levy’, removing the need for an interim levy next year and should mean some of the following year’s levy is paid in advance. All of which should, in the long term, smooth payments.”
