In its Annual Report, the Financial Services Compensation Scheme has described 2020/21 as its “most productive year” to date. In the 12 months to March 31 2021, it made decisions on 99,528 claims, and in 52,623 (53%) of these cases, either compensation was provided to the claimant, or they received assistance in transferring to a new product.
The successful claims encompassed some 1,131 failed firms, although only 92 firms actually failed during the course of the last financial year. In total, £584 million in compensation was paid, a rise of 11% compared to the 2019/20 figure of £527 million.
The customer satisfaction score from those using the Scheme’s services rose to a record high of 84%.
45,227 authorised firms financed FSCS’s work during the year via the payment of levies. While these levies continue to rise, the costs of handling individual claims reduced by 3% compared to the previous year. In his statement in the report, FSCS chair Marshall Bailey said that the increasing use of artificial intelligence and automation now allows the Service to process many claims faster.
The rise in the levy is attributed to three main factors, according to the report:
- The significant costs resulting from a single firm failure – that of a firm that issued mini-bonds
- An increase in complex pension claims
- An increasing number of firm failures amongst those offering Self Invested Personal Pensions
Caroline Rainbird, FSCS’s Chief Executive, said:
“I am very proud of how our people smoothly adjusted to working from home early on in the first lockdown – without losing a day of service – and continued to put our customers first throughout the year.
“Receiving our highest-ever customer satisfaction score of 86 per cent in a month would be a great achievement at any time. But to gain this in one of our busiest years and during a global pandemic is a tribute to the incredibly hard work of everyone at FSCS.
“In 2020/21 92 firms failed and FSCS paid £584m in compensation. While I am proud of our response to the demands this presented, I am saddened that this represents more difficulties for consumers and a rising levy.
“I have said before that the levy is far too high, and we must take swift action with the industry and regulators to tackle the causes of the increase. We have been looking at how we can use our data and knowledge to help provide solutions and are working closely with the FCA on this. We meet with the industry regularly to discuss how we can better understand why firms fail and help to reduce future levy bills.
“As well as putting forward policy proposals for better outcomes in the consumer investment market, we continue working with the wider industry in the fight against scams, sharing our unique data and knowledge with the FCA and others as appropriate to help identify and act against those profiting from consumer misery.”
In her statement in the report, Ms Rainbird comments that the FSCS has done a lot to prevent claims arising in the first place. She highlights her organisation’s work in promoting awareness of scams amongst consumers, and how the FSCS identified a number of suspected cases of phoenixing – where directors of failed firms set up new entities.