Figures outlined in the FSCS Plan and Budget published today, indicate that life and pension intermediaries will be expected to pay £57m in 2015-16. This is a jump of 73% compared to last year’s levy of £33m.
FSCS chief executive scheme, Mark Neale, said he expects a “significant rise” in compensation costs, reflecting last year’s trend of “bad advice” to transfer pension savings into self-invested personal pensions (SIPPS).
He said: “So far, we have compensated eligible investors for the pension losses incurred.”
Neale added, however, that many of these investors have also suffered “significant investment losses as a result of advice to invest in risky, non-standard assets such as overseas property developments”.
“FSCS is now close to finalising its view about whether these losses too are eligible for compensation.”
Investment advisers also face a rise in the amount they have to pay to the body, which will see a jump from £112m to £125m.
Despite this, the FSCS has predicted that the number of claims against investment intermediaries will reduce by almost a half next year from 10,000 to around 5,000.
The overall levy for 2015-16 – which includes both compensation and running costs – could be raised to £287m, an increase of £11m compared to last year’s total of £276m.
Neale said the body is currently in the process of pursuing recoveries to reduce the costs of compensation to levy payers, highlighting the £50m refund to fund managers in December last year following the failure of the Keydata firm in 2010.
The FSCS also said it expects to spend £4m less on major recoveries as it moves into the next phase of its Keydata action.
FSCS will announce the final levy in April after it has reviewed its claims and levy assumptions.
Responses to the Plan and Budget must be made by 20 February this year.
