FSCS levy on mortgage brokers doubles
The Financial Services Compensation Scheme levy charged to brokers arranging home finance has doubled in a year from £5m in 2015/16 to £10m in 2016/17.
Even more drastic is the rise in charges levied against brokers arranging general insurance – last year the charge was zero but as a result of the FSCS assumptions for the next year the levy has risen to a whopping £19m.
The rises reflect flat claims assumptions in the general insurance intermediation sector and a marginal rise in home finance intermediation claims from 559 last year to 600 this year.
In its plan and budget published today the FSCS said that home finance intermediation claims were expected to remain broadly flat over the coming year.
But it added: “We are starting to see a slight increase in the proportion of claims that are found eligible for compensation, particularly where claims relate to negligent advice to borrow to invest in overseas property schemes.”
The FSCS is forecasting that compensation payouts will total £7.02m relating to home finance claims in the year 2016/17 with the remainder of the levy being charged to settle an outstanding balance of £2.14m from the year 2015/16.
Overall the FSCS is budgeting for a £363m indicative levy on firms for the period and has said operating costs are falling by nearly £2m for the second year: from £69.1m in 2015/16 to a proposed budget of £67.4m in 2016/17.
Mark Neale, FSCS chief executive, said: “I am happy to report that our management and operating costs are lower than last year again.
“It’s an indication of our commitment to value for money. One of our key imperatives is modernising our claims handling system and we have taken steps towards achieving this.
“We are pushing ahead with further changes that will make life easier for consumers. An online portal, through which they can submit claims, is being tested. In time, it will provide a more efficient service that, ultimately, transforms customers’ experience. Overall, we’re moving towards streamlining our claims, reducing management and operating costs, which benefits our levy payers, and creating a better experience for consumers.”
The FSCS will review its claims and levy assumptions and announce the actual 2016/17 levy in April. The plan and budget is for consultation which will close on 22 February 2016.