FSCS cuts total levy by £206m

The Financial Services Compensation Scheme (FSCS) has reduced the total levy by £206m but the Association of Mortgage Intermediaries (AMI) has warned that there could still be issues in the future.

It has also deferred invoicing the element relating to the supplementary levy on firms relating to the Retail Pool.

The scheme ensures customers can get back up to £85,000 should their bank, building society or other investment fail. It does not apply to all investments, however.

Despite this, the Association of Mortgage Intermediaries (AMI) believes that while this is a positive stance being taken by the FSCS executive and board, there remains significant issues in the medium term.

In January the FSCS said a large number of likely failures sparked in part by COVID-19 required it to ask members for a record £1.04bn, which has now been reduced to £834m.

Robert Sinclair, chief executive of AMI said: “The FCA and firms can take no comfort in this reduction.

“The amount of compensation for the failure of the FCA to adequately control markets is still eye-watering.

“Whilst the amount mortgage and protection advice firms will have to pay will now only be slightly higher than last year, the guillotine remains over their necks for a further levy later in the year.

“This is due to the widespread fraud and poor advice in the investment and pensions sector, for which they have no direct responsibility.

“AMI remains of the view that the funding of the compensation scheme still needs the development of a new approach.

“As a minimum Treasury must allow FCA to retain financial penalties to reduce the amount good firms are being asked to pay.

“A new product levy that all consumers pay would be the simplest solution to ensuring a more durable funding mechanism to compensate consumers, whilst avoiding the jeopardy firms face each year as the scheme has to hand round the begging bowl.”