FSCS confirms £265m levy with no charges to mortgage intermediaries
The Financial Services Compensation Scheme (FSCS) has confirmed the total payable levy for the 2024/25 financial year has been set at £265m.
This is lower than last year’s final levy of £270m and lower than the initial proposed charge for the 2024/25 financial year.
The FSCS said it expected to pay £363m in compensation this year, which is significantly down from the estimate of £457m compensation it made in its November outlook.
The organisation said this reduction was due to a lower compensation payout in 2023/24 than expected. The amount of compensation paid was also lower on some claim types.
Additionally, the FSCS recovered more than £54m from the estates of failed firms and other third parties. This resulted in a surplus of funds, which have been used to offset this year’s levy.
There is no retail pool levy expected for this year, as the FSCS does not predict any class to breach the annual levy limit.
The reduction was also driven by changes in two funding classes – life distribution and investment intermediation (LDII) and general insurance provision.
The LDII class saw a £51m reduction in the compensation paid last year, which created an additional surplus. For the coming year, the forecast compensation to be paid has decreased by £68m due a reduced claim uphold rate and a lower average compensation value.
Within the general insurance provision class, there was a £27m reduction in compensation costs for 2023/24, and the compensation forecast for 2024/25 was lowered by £34m. Additionally, no new failures are expected for the general insurance class this year.
Martyn Beauchamp, interim chief executive of FSCS, said: “We made a number of successful recoveries in 2023/24, with more than £54m recovered from the estates of failed firms and other third parties. This has added to surpluses in some funding classes being carried forward. We’ve used these surpluses to reduce the levy for 2024/25 to £265m.
“In addition, we’ve refined our forecast for the year ahead – learning from what we’ve seen recently and taking note of persisting trends. This means a reduction in the compensation we expect to pay in 2024/25, which now stands at £363m.
“As always, we will keep the industry informed of any changes to our forecasts in a timely fashion. The next outlook will be published in the autumn.”
No FSCS levy for mortgage intermediaries
The FSCS said firms in the home finance intermediation class, including mortgage brokers, would not pay an annual levy for 2024/25.
No new firm failures are expected, and while the compensation payments and forecast are set to total around £250,000, the surplus from the previous year will cover the costs.
There will also be no levy for firms in the general insurance distribution class, as the FSCS does not expect any new failures.
It said it was continuing to see a fall in payment protection insurance (PPI) claims, which were the main type of claims in this division.
The FSCS also received an unexpected £2.4m in additional recoveries, which added to the surplus. The organisation said last year’s surplus should cover any compensation payouts this year.
The levy expected from firms in the life distribution and investment intermediation class, which includes protection advisers, is £65.5m. This is a £75m reduction from what was forecast in November.
Shekina is the deputy editor at Mortgage Solutions and commercial editor at Mortgage Solutions and Specialist Lending Solutions. She has nearly eight years of experience in the B2B publishing market, having previously covered the hospitality, retail, pet, accounting and jewellery sectors.
Shekina has worked for Mortgage Solutions and Specialist Lending Solutions for almost five years. Here, she covers the market’s breaking news stories, engages with professionals in the sector, and oversees any commercially agreed content in partnership with mortgage-related companies.
This includes presenting webinars and hosting roundtable discussions on developing themes in the mortgage sector.
She is an NCTJ-trained journalist and was nominated for the Headline Money Awards Mortgage Journalist of the Year in 2021.
In her spare time, Shekina likes to read, travel, listen to music and socialise with friends.
She currently reports on current events in the mortgage market and liaises with financial clients to produce sponsored content.
Follow her on Twitter at @ShekinaMS
