"Clearly a reduction in the original levy forecast is good news for firms. However, the number outlined by the FSCS today is still too high"
In January, the FSCS forecast that its 2021/22 levy would be £1.04bn, a 48% increase on last year, due to an expected increase in firm failures related to Covid-19.
In its Plan and Budget for 2021/22, mortgage brokers in the 'home finance intermediation' category were due to be charged £22.9m towards the levy, up from £3m this year.
However this morning, the FSCS announced that the levy for the home finance intermediation class has fallen from £22.9m to £11.5m for the next financial year.
Despite the cut, the total levy is still four times the amount paid this year.
Overall, the FSCS has announced a reduction in its levy for 2021/22 by more than £200m to £833m. In its outlook, the FSCS said that due to the extension of government support schemes, some firms that were expected to fail this year could now "fail in the 2022/23 financial year and beyond", meaning that some claims will be pushed back.
Tim Fassam, director of government relations and policy at PIMFA, said: “Clearly a reduction in the original levy forecast is good news for firms. However, the number outlined by the FSCS today is still too high, while predictions that much of the pain resulting from failed Self Invested Personal Pensions will be felt next year is of little comfort to our firms.
“We have set out a roadmap towards lower levies in the long term and are urging Government and the Regulator to work with us and the rest of industry to create a sustainable solution, which ensures that future levy costs, individual failures and ultimately poor consumer outcomes are consigned to history.”
Robert Sinclair, chief executive of the 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.”
