The Financial Services Compensation Scheme (FSCS) has confirmed that it will levy £649 million from firms for 2020/21, £14 million more than forecast in its Plan and Budget for the year which was published in mid-January. The figure includes an amount of £74.7 million for management expenses which are the costs of running the FSCS,
BIBA members who are in the General Insurance Distribution funding class will pay towards a final levy of £18 million, which is £5 million down on the indicative levy published earlier this year. The decrease is down to firms in the General Insurance Distribution class not now having to contribute towards the retail pool as the Investment Provision class is not now expected to breach its class limit. The General Insurance Distribution class will benefit from a provider contribution of £6 million from the General Insurance Provision class.
The main change in the compensation forecast since the indicative levy was announced in the Plan and Budget, is the inclusion of £44 million to cover estimated compensation costs for London Capital and Finance (LCF). This has been attributed to the Life Distribution and Investment Intermediation Class.
While the FSCS is continuing to see an increase in pension related claims, the Scheme has reduced its forecast outlined in its January Plan and Budget for SIPP operator claims by £7 million.
Caroline Rainbird, CEO of the FSCS, said: “We publish this Outlook during what is an extremely challenging time for everyone, and we appreciate that the impact of COVID-19 is likely to be felt for a considerable period of time. Although the pandemic has altered FSCS’s working practices, it has not impacted on the day-to-day delivery of our service, and we have continued our business as usual. However, we recognise that business as usual will not be possible for everyone and that some may face challenges due to the current economic situation.”
Jimmy Barber, COO of the FSCS, said at a trade association briefing today that the overall impact of Covid-19 on the industry was still developing, and he could not speculate about what impact the pandemic could have on firms and the work of the FSCS. The Scheme was, however, working closely with the regulatory family, ie the FCA and the FOS, to be as ready as possible for what may come. The FSCS would also have an ongoing conversation with the industry to keep it informed about developments with compensation claims and the levy.
The FCA announced in Consultation Paper 20/6 that in order to help medium and smaller firms it was proposing to extend the period for paying their fees by two months to 90 days. This means that 89% of firms will have until the end of 2020 to pay their fees and levies. Larger firms will be expected to pay their fees under the usual payment terms. Invoicing for regulatory fees and levies is expected to start in July and run across the summer months, with smaller firms expected to receive their invoices the end of that run, somewhere near September.
Members may access a copy of the May 2020 edition of Outlook by clicking here.
BIBA members’ compliance and regulation queries should be directed to: firstname.lastname@example.org.
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