The Financial Services Compensation Scheme’s (FSCS) announcement that it will not be invoking the retail pool in financial year 2021/22 or asking the FCA to invoice an interim levy on firms as part of this year’s costs will be welcome news to firms. This should not be taken as a reprieve but a stay, a deferment of previously predicted costs into the next financial year as the expected firm failures have not yet crystallised.
Early indications from FSCS are that their total costs for the financial year 2022/23 will be £900m, but this has a significant degree of sensitivity and will be updated in January and then again in the April. Just an indication but this could bring about a retail pool levy of circa £200m.
Whilst we fully support the valuable work of the FSCS, we remain concerned that our well managed member firms are required to help foot the bill for the costs of bad behaviour of failed firms who in some cases intentionally profiteered from and caused harm to consumers in the pensions and investment markets.
As 73% of the FSCS costs come from advice more than 5 years ago, any actions taken by FCA today will have limited short term impact. The industry needs a better solution to this compensation mess – no option should be off the table.
AMI stands ready to work with the FCA and FSCS to establish a better and fairer funding mechanism for the FSCS. Previous work on the scheme has seen the FCA at its best in promoting constructive debate. A product levy remains the best workable solution. We hope the doors to a new debate will be opened soon.
Robert Sinclair, AMI Chief Executive