The Financial Services Compensation Scheme (FSCS) levy forecast for next year has been reduced to £717m.
This is still represents an increase on the previous year.
The FSCS will not be invoking the Retail Pool in financial year 2021/22 or asking the FCA to invoice an interim levy on firms as part of this year’s costs. The announcement defers those costs into the next financial year as the losses that would have to be compensated have not yet materialised as firm failures have not yet crystallised.
In order to assist firms budget planning, FSCS has brought forward an estimate of its costs for the 2022/23 financial year. This indicates that their total costs will be £900m, but this has a significant degree of sensitivity and will be updated again in the January consultation and then again in the April policy statement. However, this could bring about a Retail Pool levy of circa £200m. But, this is an “uncertain” number.
Robert Sinclair, chief executive of AMI, said: “AMI is pleased to see that the FSCS does not need to invoke the Retail Pool for financial year 21/22, so avoiding an interim levy on mortgage and protection firms in the New Year.
“For 22/23 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.
“We are concerned 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. 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.”
