FSCS levy forecast to rise 13% as number of SIPP claims increase
Advisers will be expected to pay £213m towards the Financial Services Compensation Scheme levy for this coming financial year, that's almost 13% more than the previous year.
In its most recent plan and budget which was published on 16th Jan 2020, the lifeboat scheme outlined it's initial forecasts for the levy and potential claims volumes for 2020/21, with a predicted total of £635m on the industry.
This is £87m more than the total for 2019/20 and the FSCS puts the increase down primarily to a rise in the number of self-invested personal pension claims.
Advisers will see their collective levy go up by £24m from the amount the paid for this year's levy, which was £189m.
According to the FSCS, claims in relation to SIPP firms - where the conduct of the operators give rise to a civil liability to investors - was the biggest growth area in terms of costs.
There have been nine SIPP operator failures since January 2018 and the expected annual cost for 2020/21 is £209m. Before 2018 there had been no such failures.
The FSCS pointed to GPC SIPP and Berkeley Burke SIPP administration as two high profile cases, noting there was a chance of more claims relating to these companies in particular and this area in general.
It expects to make 7,700 decisions on SIPP claims in 2020/21 - 114% more than 2019/20.
Although, this has boosted the levy across all classes, the biggest victim of the change is the investment provision class, which will now fund £200m of the levy, up 61% from last year.
The FSCS's management levy is also set to increase by nearly 5% for 2020/21. The Financial Conduct Authority and the Bank of England published a paper on January 15th 2020, proposing the change to battle an expected ride in the volume and complexity of claims.
Caroline Rainbird, Chief Executive of the FSCS, said: "The past eight months since joining FSCS have left me very impressed by its strength as an efficient and effective compensation scheme, delivering an empathetic service for consumers, many of whom are vulnerable.
"We are able to do this by working in partnership with the financial services industry and the regulatory family."
Ms Rainbird said the lifeboat scheme expected to face a number of challenges in the coming year, such as the vulnerability of customers, a higher number of firm failures and a growing number of complex claims.
She added: "I am confident that FSCS's plan and budget for 2020-21 provides the FSCS with the resources and strength it will need to meet these demands in the interests of all our stakeholders."
The information in this article has been sourced from: https://www.ftadviser.com/regulation/2020/01/16/advisers-fscs-levy-to-jump-13-as-sipp-claims-rise/?utm_campaign=FTAdviser%20news&utm_source=emailCampaign&utm_medium=email&utm_content=
If you have got an issue with a SIPP, the claims bureau may be able to assist you with submitting a strong case the FSCS and get your money back.
Give us a call on 01903868251.