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FSCS Plan & Budget Forecast

FSCS Plan & Budget Forecast

The Financial Services Compensation Scheme(FSCS) have outlined their expected management costs for claim volumes for the financial years of 2020/2021.  The increasing rise of pension claims are now outweighing Payment Protection Insurance (PPI) claims, with the main causes surrounding mis-advice to transfer into high risk investments; predominantly Self Invested Personal Pensions (SIPPS).

Thus growth has contributed to the levy indicative for 2020/2021 to increase by £87m, since 2019/2020, to a new total of £635m.  This rise reflects the increasing numbers firms are currently forecasting to claim; with the complexity of cases having a profound effect on claim costs.  SIPP claims are currently at the forefront of the claims management growth, contributing to 43% of new claims.

The FSCS state that the three main reasons for the increase of levy is:

01.
The total compensation cost has increased by £46m – mainly due to increasing SIPP operator claims falling on the Investment Provision class;
02.
The 2019/20 levy benefited from an opening surplus of £32m, which is not available for 2020/21; and
03.
The recoveries expected to be received in 2019/20 are £39m greater than forecasted for 2020/21.

Confirming that the supplementary levy for 2019/20 will be £50m for the Life Distribution, Pension and Investment Intermediation class and £30m as a refund for the Deposits class.

With there being a total of nine SIPP operator failures since January 2018 with an expected annual cost for 2020/21 at £209m. The FSCS expect to make over 7.5k decisions of such claims in 2020/21; a 114% increase on 2019/20 stats forecast.  Therefore, outlining the impending decisions for 2020/2021.

An update to the indicative levy amount for the next financial year will be issued in April.