The Financial Service Compensation scheme has cut its forecast levy from £833m to £717m for 2022
This is a 13 per cent reduction, and comes as a result of lower than anticipated investment payouts and firm failures. The FSCS says this means it will not be invoking the ‘retail pool’ in the 2021/2022 levy which means there will be no interim levy on mortgage and protection firms in the new year.
However, even at this reduced rate this levy will still be a year-on-year increase for advisers.
The FCSC also says it expects these failures to manifest in 2022/23 which could results in a shaper increase in the years, ahead, with the levy then forecast to rise to £900m, with increased contributions expected from the retail pool.
FCSC chief executive Caroline Rainbird says: “While the lower levy forecast for this year (2021/22) may be seen as good news, it is important to note that the reduction is mainly due to failures that were expected this year now looking likely to happen next year or beyond.
“We hope that the industry finds our early 2022/23 levy forecast helpful to plan for the year ahead.”
The Association of Mortgage Intermediaries chief executive Robert Sinclair says: “AMI is pleased to see that the FSCS does not need to invoke the Retail Pool for financial year 21/22, so avoiding an interim levy on mortgage and protection firms.
“For 22/23 we remain concerned about the costs being transferred from bad behaviour in the pensions and investment markets on our innocent member firms. The continuing retail pool liabilities being added will not be charged until later in 2022, but this guillotine hanging over the heads of mortgage firms is stressful and unwelcome.”
He adds: “We are concerned that 73 per cent of the FSCS costs come from advice given more than 5 years ago. This means that any actions taken by FCA today will have limed short term impact. The industry needs a better solution to this compensation mess.
“AMI stands ready to work with the FCA and FSCS to establish a better and fairer funding mechanism for the FSCS. Previous work on the scheme has seen the FCA at its best in promoting constructive debate. We hope the doors to a new debate will be opened soon.”
This reduction was welcomed by PIMFA, the trade association for wealth management, investment services and the investment and financial advice industry – who also called for more radical change.
PIMFA chief executive Liz Field says: “We are encouraged that the FSCS levy forecast is lower for the coming year.”
However Field added: “PIMFA remains absolutely clear that the current levels of FSCS funding are unsustainable for the industry and can only be addressed once the drivers of FSCS claims are suitably addressed.
“This means improving the standard of supervision of the sector, looking at the market distortion at play as a result of the FSCS and improving the provision of intelligence sharing and ensuring that it is acted upon.”
Field adds that the FCS has acted on a number of its recommendations over the past year. She called for the FCA and Government to do more, calling for short-term easements alongside long-term reform.
