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:
- The total compensation cost has increased by £46m – mainly due to increasing SIPP operator claims falling on the Investment Provision class;
- The 2019/20 levy benefited from an opening surplus of £32m, which is not available for 2020/21; and
- 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.
Read more here: https://www.fscs.org.uk/news/fscs-news/plan-budget/