04 Jan 2018

Financial advisers landed with extra 24 million pound levy

The Financial Services Compensation Scheme (FSCS) is to raise an additional £23.9m from financial advisers, following higher than expected claims about self-invested personal pensions (Sipp). The scheme said in its latest Outlook publication that it had expected the costs to be higher than the amount levied on advisers for this year, but decided to limit the levy with a view to raising any extra amounts needed later in the year.

The annual levy limit in the life and pensions intermediary class is £100m, which the FSCS raised in April. At the same time, it said, it had expected the compensation costs to be closer to £146m.

It said it had levied to the amount of the limit rather than triggering the retail pool, because of the uncertainty around the number of claims and their value.

The FSCS has now said:

“The supplementary levy arises from continuing growth in the volume of Sipp-related claims falling on life and pension advisers.”

“Our forecast in April was that these costs would amount to around £146m, but, because of the uncertainty attached to this forecast, we elected to raise a levy of only £100m. We now calculate that, on current volumes and average costs, we shall need to raise only around an additional £24m in 2017/18.”

Since April, the overall expected compensation costs for the year have reduced by about £15m, the FSCS stated.

The scheme also had a higher than expected opening balance in the class in June, mainly because of a reduction in average compensation for Sipp-related claims, which make up the
majority of costs in this class.

The lifeboat fund will also raise an additional £4.7m from mortgage advisers.

By Kathryn Pegler