Financial Services Compensation Scheme  

FSCS plans £69m interim levy

FSCS plans £69m interim levy

The retail pool will pay an estimated extra £69m towards the cost of running the Financial Services Compensation Scheme (FSCS), due to pension transfer related claims.

In its November outlook published today (November 28), Mark Neale, FSCS’ chief executive, revealed the FSCS was expecting a deficit of about £70m by year end spurred by the "continuing growth in pensions claims".

This comes despite the scheme raising the maximum levy of £75m on this sector in April.

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Mr Neale said: "This will, I am afraid, necessitate a supplementary levy falling on the retail pool. We shall announce the size of that supplementary levy in January."

The document also revealed that self-invested personal pension (SIPP) and other pension transfer-related failures had made up 45 per cent of all defaults declared and 83 per cent of resulting claims received during 2018.

This was due to the larger claims volumes that relate to pension adviser defaults, it said.

Based on experience, the FSCS is expecting the recent increases in Sipp advice-related costs to level off in 2019/20.

Since 2016/17, claims relating to other types of pension transfer have increased significantly, such as the ones relating to British Steel Pension Scheme (BSPS).

The FSCS expects this trend to continue through 2018/19, with a 49 per cent increase in cost from 2017/18, spurred by increased claims management company activity in this area and higher uphold rates.

In an update published last week (November 22), the FSCS said it has to date completed assessments for 14 claims against Active Wealth from BSPS, with total compensation paid so far of just over £285,000.

Of these 14 claims, four resulted in no compensation payment because it was determined that the claimant had suffered no loss.

Eight claimants received compensation ranging between £4,300 and £50,000.

There are currently in the pipeline a further 49 claims from BSPS members against Active Wealth, which entered into liquidation in February after the firm was told to cease any pension transfer activity by the FCA months earlier.

It was one of 10 firms which stopped giving transfer advice after they were identified as key players advising members of the BSPS to transfer out of their defined benefit (DB) pensions.

Last year Active Wealth was working alongside unregulated introducer firm Celtic Wealth Management & Financial Planning, which had referred the clients to the adviser.

However, the FSCS might have to review these payments, as it is considering making changes to the way it is calculating the compensation for the steelworkers.