The Financial Services Compensation Scheme has cut its levy for advisers for this year by £38m.  

The customer compensation body has reduced the total levy payable by firms for the 2025/26 financial year to £356m from £394m, since its early forecast in November. 

It now expects to pay £332m in compensation during 2025/26, the agency says in its latest chief executive’s report.

FSCA chief executive Martyn Beauchamp points out: “These reductions reflect two factors in particular: we exceeded forecast on recoveries in 2024/25, and we’re expecting fewer claims in the life distribution & investment intermediation class, with average uphold rates in this class also currently trending lower than historic averages.” 

However, the agency adds that its surplus balances were substantially reduced across all classes during the 2024/25 financial year “as they have been mostly utilised offsetting prior levies.  

“The 2025/26 levy will therefore not be offset to the same extent as in previous years.” 

Beauchamp adds: “We continue to refine and improve our forecast models.  

“This has led to greater accuracy in our compensation forecasting, although it will always present a challenge due to the variables involved, including the number of firms declared in default, the likely number of claims for each of these firms, and when these claims are likely to come to us.”   

Broadstone head of redress Brian Nimmo adds: “The lowered predictions for compensation payments in 2025/26 reflect broader trends within the wider redress landscape as pay-outs for consumers reduce in size. 

“A movement towards more claims requiring specialist investigation is also emerging with over two-thirds of claims now considered ‘complex’ up from one-third just a few years ago.  

“It highlights the complex financial landscape that both firms and consumers must navigate nowadays alongside the specialist advice that firms require to ensure they are treating consumers fairly.”