Claims to the Financial Services Compensation Scheme against failed financial advisers over retail investments are expected to halve in the coming year, as high volumes of complaints over major scandals such as Catalyst and Arch Cru finally begin to subside.
The compensation scheme today (20 January) revealed it expects a reduction in the overall volumes of new claims in 2015 to 2016 to 25,590 compared with 28,108 in 2014 to 2015.
In its latest prospective demand for cash from the industry, FSCS is calling for £287m from the industry, compared with total levies so far in 2014 to 2015 of £276m.
The scheme stated it expects new claims against investment intermediaries to reduce by almost half next year and believes it will receive 5,353 claims in total, compared to 10,325 in 2014 to 2015).
Notably, FSCS stated claims against Catalyst Investment Group and CF Arch Cru funds seem to be coming to an end. However, the scheme thinks other types of investment claims will continue in steady volumes.
Last year, investment intermediaries were billed for £112m out of the £276m total. Figures providing a breakdown for this coming year are unlikely to be available until the final plan and budget is published in April.
FSCS stated it expects to see a significant rise in compensation costs arising from advice to transfer pension savings into self-invested personal pensions.
General insurance brokers were told they will probably not be due a levy next year because of a higher opening fund balance and the expected fall in claims volumes throughout the year. This compared to a levy for this sector of £38m in 2014 to 2015.
Mark Neale, chief executive of the FSCS, said: “FSCS is there for consumers when firms fail. It makes a valuable contribution to consumer confidence as a result. During 2015 to 2016, we will again come to the aid of thousands of consumers when firms go bust.
“We take our accountability to levy payers very seriously. That’s why we publish our Plan and Budget. And it is why, following the £50m refund to fund managers, we will soon publish an account of our recoveries work on Keydata.
“It will set out the very substantial recoveries we have made relating to the firm and the costs of achieving those recoveries.
“The Plan and Budget clearly lays out our plans for the year ahead. It reflects our commitment to being open and accountable and gives the industry information on claims volumes and costs.
“It makes the connection between the consumers we protect and the industry which funds our protection.”
Yesterday the Financial Conduct Authority proposed that the Financial Services Compensation Scheme should have a management expenses levy limit of £74.4m for the 2015 to 2016 financial year, a 7 per cent fall on the current year.
The FCA said out of this figure £69.1m would go towards FSCS management expenses.
emma.hughes@ft.com
