The Financial Services Compensation Scheme (FSCS) revealed that it paid out a total of £527m ($662m, €586m) in compensation during the 2019-20 financial year.
This is a sharp increase from the successful claims submitted in 2018-19, which accounted for £448m.
Of the total 2019-20 sum, £282m was paid out over claims relating to life insurance, pension distribution and investment intermediation – a 36.2% rise from the £207m paid in the previous year.
The money awarded for compensation came from levies contributed by over 49,000 financial services firms, the lifeboat scheme said.
Problematic pensions
The FSCS added that the most expensive sector for claims remains self-invested personal pensions (Sipps), which totalled to £161m for the year, compared to the £154m of the previous period.
This prompted the lifeboat scheme to ask for £87m in additional levies in January 2020 to help foot the bill.
Financial advisers were only given 30 days to pay.
The FSCS said: “There have also been two new stockbroker failures during the year, SVS Securities and Reyker Securities, which generated a £56m provision for the return of assets and cash to their customers.”
Asset recovery
Caroline Rainbird, chief executive at the FSCS said: “In 2019-20, FSCS helped over 258,000 customers who had suffered losses from 874 failed financial services firms, including some 137 firms which failed this year.
“It is vital we recognise that FSCS was only able to pay compensation because of the firms who paid our levy, together with the money that was recovered by FSCS.”
The lifeboat scheme said it managed to recoup around £50m from 88 estates “to either offset levies or return to the industry”.
Rainbird continued: “It is crucial that we continue to work with the industry to do what we can to help reduce compensation costs and avoid financial harm to consumers.
“We will continue to work with our stakeholders to make sure that we provide a trusted, fair and efficient compensation service that helps to build trust and confidence in the UK’s financial services industry.”
