FSCS confirms latest levy of £717m for 2021/22

The Financial Services Compensation Scheme (FSCS) has announced that its total levy for the 2021/22 financial year is now £717m.

This figure is lower than the £833m levy announced at the last forecast in May, which included £116m for the retail pool.

The retail pool is a separate pot that FCA funding classes contribute to if they have not reached their maximum limit, and another class has exceeded its own. The FSCS has today announced that it will not be invoking the retail pool for the 2021/22 financial year, or asking the FCA to invoice an interim levy on firms as part of this year’s costs.

The compensation scheme cited that failures expected in 2021/22 have “not yet happened” and are now “more likely to occur in 2022/23 and beyond”.

In order to assist firms budget planning, the FSCS has brought forward an estimate of its costs for the 2022/23 financial year, indicating that total costs will be £900m. However, approximately £400m of this relates to compensation costs for failures that have not yet occurred.

FSCS chief executive, Caroline Rainbird, said: “We hope that the industry finds our early 2022/23 levy forecast helpful to plan for the year ahead. We will continue to keep the industry updated on our assumptions and latest forecasts as events play out.”

She added: “We will continue to play our role, but again we want to highlight the importance of the wider industry in playing its part. It must proactively call out, and take action against, poor behaviour and do more to identify sources of consumer detriment and practical solutions. It is only through serious action and collaboration that we can combat the issue of the rising levy.”

Responding to the announcement, the Association of Mortgage Intermediaries (AMI) revealed it was “pleased” to see the FCSC not invoking the retail pool for 2021/22, and avoiding an interim levy on mortgage and protection firms in the new year.

However, AMI chief executive, Robert Sinclair, warned: “For 2022/23 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.”

Sinclair also expressed concern that 73% of the FSCS costs come from advice more than five years ago.

“This means that any actions taken by FCA today will have limed short-term impact,” he added. “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.”

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