Important:

This article is for information purposes only.

Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.

There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.

Mortgage broker fees to rise as FSCS levy set to hit £1bn

Mortgage broker

The FSCS is also forecasting an ongoing rise in complex pension advice claims

The Financial Services Compensation Scheme (FSCS) has forecast that its 2021/22 levy will 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 will be charged £22.9m towards the levy, up from £3m last year.

The FSCS is also forecasting an ongoing rise in complex pension advice claims and further failures of self-invested personal pension (SIPP) operators. Additionally, it expects pay-outs related to recent failures in the General Insurance Provision class.

The Scheme says its current forecast ensures it can pay out an expected higher volume in claims (a 72% rise compared to the 2020/21 original forecast, and a 6% increase on the latest forecast for 2020/21) over the next financial year.

In the Plan and Budget, FSCS has revised the 2020/21 supplementary levy from £92m to £78m, due to fewer LCF claims being upheld than forecast in November 2020.

Taking account of class surpluses that will be used to offset the levy, £44.5m will be invoiced for the supplementary levy by the FCA in early February.

FSCS will invoice the largest 1,000 regulatory fee payers a 50% advance payment towards the levy in March 2021.

As well as a rise in compensation costs, FSCS’s management expenses budget being consulted on is £90.5m. This is a £7.3m (9%) increase on the forecast outlined in the November 2020 Outlook, and a £12.4m (16%) increase on its 2020/21 budget. The increase is due to a rise in the anticipated number of claims as well as the growing complexity, and therefore processing costs, of claims.

Caroline Rainbird, chief executive of FSCS, said: Ongoing trends in a number of classes, and the widespread economic impacts of Covid-19, mean we are anticipating an increase in firm failures over the next financial year. This will likely lead to a rise in the volume of claims, many of which are complex, and therefore an increase in the levy.

Important:

This article is for information purposes only.

Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.

There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.