Mortgage brokers will not be required to pay an annual levy to the Financial Services Compensation Scheme (FSCS) in 2022/23. 

In the latest outlook, the FSCS says mortgage brokers are exempt from levies this year due to compensation costs being lower than expected in 2021/22. 

Data released by the FSCS shows that the opening balance for the class has increased by a further £3.5m, which has been used to offset against the 2022/23 levy.

In addition, the FSCS says an £8m retail pool contribution will no longer be required because it no longer expects the Life Distribution and Investment Intermediation (LDII) class to breach its annual levy limit and require additional funding from other classes.

The data shows that compensation pay-outs expected for 2022/23 have decreased from £5m to £1m. 

The FSCS also announced that home finance providers will not be required to pay contributions in 2022/23.

FSCS says explains that it does not receive claims from home management providers as they are not eligible for compensation. However, they do pay a provider contribution to the Home Finance Intermediation class and a retail pool levy when required.

The latest data shows the annual levy forecast for 2022/23 has been revised to £625m from the November forecast of £9.1m. 

Although the levy itself has reduced, FSCS says it expects to pay its customers more compensation in 2022/23 than it did in the previous year, totalling £698m.

The main driver behind the increase in compensation costs has been named as the ongoing trend of more complex claims in areas such as pension advice and general insurance.

FSCS chief executive Caroline Rainbird says: “The levy enables FSCS to continue to provide a trusted compensation service that helps build confidence in the industry, particularly during heightened economic volatility.”

“While the headline levy number has decreased since our initial forecast in November, the total amount of compensation we expect to pay is greater than last year. Longer-term data suggests that the amount of compensation we pay to customers will continue to increase.”

“We have faced criticism from some levy payers over the size of their FSCS levy bill in recent years, but these costs are only a symptom – driven by poor consumer outcomes and the compensation we need to pay out as a result.”