The Financial Services Compensation Scheme has offered to meet with Treasury Select Committee chairman Mel Stride MP as its funding costs continue to soar.
The FSCS recently announced a forecasted levy of £1.04 billion for the 2021/22 financial year, an annual rise of 48%. Few people would be brave enough to predict a reduction in these increases in the near future either and there must be a strong likelihood that the costs of funding the Service will continue to rise sharply. The FSCS receives no funding from general taxation, and instead authorised firms have to pay the organisation’s entire bill.
Recognising the concerns of firms, FSCS chief executive Caroline Rainbird has written to Mr Stride offering to meet with him and explain possible alternative methods of funding the organisation.
The major reasons behind the significant hike in the levy are said to include:
- An expected increase in firm failures due to Covid-19
- An expected increase in complex pension advice claims
- An anticipated rise in failures of Self Invested Personal Pension firms
Caroline Rainbird, Chief Executive of FSCS, said:
“Ongoing trends in a number of classes, and the widespread economic impacts of COVID-19, mean we are anticipating an increase in firm failures over the next financial year. This will likely lead to a rise in the volume of claims, many of which are complex, and therefore an increase in the levy.
“This annual levy ensures we can protect consumers, which helps to improve market stability and increases confidence in the finance sector. But we appreciate that the levy is far too high and that increasing costs could put pressure on firms’ finances.
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