Financial Services Compensation Scheme  

It's not right the FSCS levy is giving chief execs sleepless nights 

Liz Field

Liz Field

More than a year since the country went into lockdown it’s worth reflecting on the incredible change many of us have experienced.

The outbreak of the pandemic and subsequent lockdown has meant that we have all had to learn to live and work in new ways.

Having grown accustomed to working from home and having proven they can be just as effective as in the office, it’s hardly surprising that a majority of people want to keep flexible working practices when life finally returns to normal.  

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Time will tell whether such flexible working practices do survive but it seems unlikely that chief executives will be able to resist such change even if they wanted to.

Most don’t, if PIMFA’s most recent business forum survey is to be believed. In fact, returning to the office didn’t feature in their top five concerns, while it is an area of focus for 2021.

In terms of operational resilience, while the last year has proved challenging, by and large firms have done well and remained resilient throughout the pandemic.

Overall, they have been able to predict their costs and budget for them, make changes where necessary and keep operating.

But what does keep chief executives awake at night is the size of the Financial Services Compensation Scheme (FSCS) levy and what their firm’s contribution will be. 

Many firms have spent considerable time and effort maintaining their operational resilience over such tumultuous times and the news that the FSCS budget was likely to increase by 48 per cent this year was shocking for many firms and was unsurprisingly met with consternation and frustration. 

Unpredictable costs

At PIMFA’s recent Virtual Fest 2, the point was made by the chief executives of several of our member firms - including Sarah Soar, chief executive of Hawksmoor Investment Management, Peter Moores, chief executive of Raymond James and Martin Andrew chief executive of Close Brothers Asset Management - that, while the FSCS levy is “the cost of doing business in a regulated sector of the market” that is only half of the problem.

The other half is that it is utterly unpredictable. 

Business leaders accept there are costs to their operations, of course they do.

And they accept the FSCS is important for maintaining consumer trust and as such the levy is one of those costs.

What becomes unacceptable is the fact that over the last few years the levy has consistently and significantly increased and continues to be unpredictable.

The result is that it makes it, at best, extremely difficult to plan and budget for and, at worse, presents firms with an existential crisis: one that is driving consolidation and hampering innovation and investment.