Financial Services Compensation Scheme  

Thousands of firms to receive rebate from FSCS

Thousands of firms to receive rebate from FSCS

Thousands of levy-paying firms are expected to receive a rebate from the Financial Services Compensation Scheme this year. 

In a statement released today (July 5) the lifeboat scheme confirmed more than 4,500 companies will not pay its levy in 2019/20, instead each receiving an average rebate of £139. 

This is because there has been an underspending in areas such as consumer credit. However, the FSCS confirmed advice firms were also among the firms to be rebated. 

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This year 46,000 companies across the financial services industry will pay the FSCS levy, with 59 per cent expected to pay less than £50. 

The top 110 firms by size, making up 0.2 per cent of all the companies to pay the levy, are expected to pay an average of £3m and almost 61 per cent of the total bill. 

The FSCS is funded by levies on companies authorised by the Financial Conduct Authority and Prudential Regulation Authority, to cover the costs of compensation payouts and management expenses at the scheme. 

Authorised firms in the financial services industry are expected to contribute a proportionate amount to the levy, with bigger businesses paying more than their smaller counterparts offering similar products and services. 

In April the FSCS confirmed it would levy £532m from the industry this year, £16m more than it originally predicted and inclusive of £74.6m in management expenses. 

The lifeboat scheme pointed to an "uplift" in the number of claims expected against self-invested personal pension operators as cause for the increase. 

Despite this the final levy to be shouldered by life distribution, pensions and investment intermediaries this year decreased from the originally predicted £175m, to £153m at a saving of £22m. 

Caroline Rainbird, chief executive at the FSCS, said the scheme did not "take for granted" the impact of its levy, acknowledging it can be a "significant and unwelcome expense" for many firms. 

She said: "The levy enables FSCS to protect thousands of people each year who have nowhere else to turn when financial service firms fail. 

"Our staff focus on the need for value for money, whilst working hard to deliver an effective and empathetic service to customers, many of whom are in a really tough place.

"Their professionalism also helps to restore consumer confidence in the financial services industry."

Ms Rainbird said the FSCS continued to pursue recoveries from the estates of failed firms to reduce the cost to levy payers, with £26m recovered by these means in 2018/19. 

She added: "We also believe that our strategy 'FSCS into the 2020s: Protecting the Future' will help to further reduce future levies. It focuses on four pillars, prepare, protect, promote and prevent.

"As we continue to see a rise in Sipp related claims we are working with our partners in industry through our prevent pillar to gain valuable insight into the causes of firm failures and about the directors and advisers involved in mis-selling."