The Financial Services Compensation Scheme has been telling advice firms it is “taking a little longer” to process claims than normal.
In a letter to an advice firm seen by FTAdviser, the FSCS said in late September it was dealing with more claims than it usually does.
“We are working on these as quickly as possible and on the oldest ones first, but it’s going to take longer than we’d like to process your claim,” the FSCS told the advice firm, which has asked not to be named.
“We’re unable to give an exact timescale, but please be assured that we are working as quickly as we can.”
The advice firm which received this letter also showed FTAdviser a separate email, sent by the FSCS earlier this year.
The lifeboat fund said it had “massively increased” resources for claims processing, which it works on in date order starting with the oldest first.
“You should start to see decisions increase from September,” the FSCS said.
The advice firm said it was waiting on a number of claims submitted in September last year which have not been touched by the FSCS since March 2022.
“As interest rates rise, the calculations [of compensation] will change against the claimant and they may get less compensation,” said the IFA.
“Because of the constant delays, all the valuations needed for the calculations need to be re-done, creating even more work for everyone.”
In a defined benefit compliant case, the FSCS tends to calculate the ‘hypothetical value’ of the benefits lost.
When interest rates rise, the hypothetical value can fall. In August, steelworkers who lost thousands as a result of the British Steel Pension Scheme scandal had seen their payouts from the FSCS fall by around £30,000.
When gilt yields rise, compensation for defined benefit pension transfers can fall. Two-year gilt yields were rising between July and August, before falling slightly after Kwasi Kwarteng’s mini "Budget" - which instead sent longer gilt yields soaring.
“We have been chasing the FSCS and struggle to get any sort of reply,” the IFA said. “They told us in the summer they had secured extra resources from September and things would improve significantly. Instead, we are getting these letters saying they are very busy.”
In many cases, the IFA said the FSCS has had the information it needs to do the calculations for at least six months.
Uptick in ‘complex’ claims
A spokesperson for the FSCS said over the past few years, it has seen an increasing number of “more complex claims” which require additional time and skilled resources to handle, mainly relating to pensions and investment advice.
“Often we need to ask for data and information from third parties for these claims, which can take some time and is outside of FSCS’s control,” they explained.
They also confirmed that the FSCS has recruited more team members with pensions expertise this year so it can maintain its service and ensure customers get decisions on their claims “in a timely manner”.