FSCS levy

ended 26. May 2022

A journalist at FT Adviser is looking for some comments from brokers in relation to the FSCS announcement today regarding its levy. The FSCS forecasted a levy of £625mn for 2022/23, a drop from the original £900mn it predicted in November. In today's update, it outlined that advisers, (life distribution and investment intermediation class) will pay £213.1mn in levies, a drop of £26.9mn from the original forecast of £240mn in November. The investment provision class also saw a fall of £84.6mn from the £200mn originally forecasted, now standing at £115.4mn. However, for the Home Finance Intermediation class, it has stayed the same. See link >> here <<. Deadline is 11am. 


 

4 responses from the Newspage community

The FSCS have to try and predict how much they may need to pay out in claims. Clearly they think they’re still going to need that amount of money to compensate people. It’s very much an opaque system and tends not to make much sense to any of us.
I have now visited a website that I am allowed to on my work computer, so I can try and understand what this levy is. Basically, it is for covering management expenses and compensation costs. I think I could end up down a rabbit warren of data if I carried on. So I went back to trying to muster up the courage to speak to a lender on live chat!!
The FSCS is fantastic at baffling us with numbers, in a nutshell they need this sum of money to cover management costs and compensation. There are big numbers however a drop from £900m to £625m surely is only a good thing I wonder where the other £275m will go? Maybe to help the elderly with their heating? Or fund a new Kareoke machine at Downing street? Who knows
The FSCS levy is a bit of an industry concern overall. The idea is that the levy is charged on all players in the market so that, if a client is found to have been treated unfairly or mis-sold and due compensation, but the firm that delivered the advice is no longer trading, then they can claim through the FSCS and the rest of the industry pick up the tab. In theory all well and good. However, the amount of claims falling into the FSCS has risen year-on-year, due to a whole host of reasons; the worst one for most market participants to stomach is bad actors purposely selling high-risk (high profit) products and then collapsing the firm and all the liability then falling into the FSCS. The bad actors keep the profits, the rest of us pick up the tab. A debate is ongoing about reforming the way that the FSCS is funded, as the continued ramping up of costs on the industry each year is simply unsustainable, especially when you remember that, ultimately, it is the end client who will see their cost to get advice increase in the form of higher fees and charges. It's also incumbent on the FCA to regulate the market and try and stop these bad actors entering (or certainly re-entering) the market in the first place. The most effective way of controlling the FSCS levy is to better police the financial advice space in the first place and by that, I mean boots on the ground inspections and visable enforcment to deter people from the market who do not have clients best interests at the top of their agenda.