FSCS pays £473m in compensation to customers of failed firms during 2018/19
This is compared with the £405 million FSCS paid in compensation in the previous year.
The UK Financial Services Compensation Scheme (FSCS) has earlier today published its 2018/19 Annual Report, with the document showing the Scheme paid a total of £473 million in compensation to 425,760 customers of failed firms during 2018/19. This amount compares with the £405 million FSCS paid in compensation in the previous year.
FSCS’s Report also shows the body raised levies on 49,224 regulated financial services firms, with a total levy income of £517 million, to fund the costs of compensation and of running the Scheme.
During the year FSCS recovered £4.7 billion from Bradford & Bingley, to repay the remaining borrowing from HM Treasury provided for the 2008/09 banking failures. To reduce the burden on industry, a further £26 million was recovered from other failures; and FSCS continued to monitor and pursue other available recovery opportunities.
SIPP related claims kept rising, as FSCS paid £123 million in compensation, £11 million higher than in 2017/18. Overall, the Scheme paid £157 million in the Life and Pensions Intermediation Class, necessitating a supplementary levy of £78 million which was funded by the retail pool. The rise in SIPP related claims contrasts with the fall in Payment Protection Insurance claims, as the amount paid in compensation for PPI claims was £11 million, down £5 million from the previous year.
The failure of Alpha Insurance was responsible for the large number of premiums returned to customers in 2018/19 – 371,000 – compared to 27,000 in 2017/18. Alpha Insurance was declared in default on May 8, 2018, shortly after the final levies were announced. This necessitated FSCS to raise a supplementary levy of £14 million, at the same time as the retail pool levies were collected in January 2019.
Regarding deposits, FSCS paid £29 million to customers of deposit taking firms. Of this sum, £22 million was paid to customers of Dial-A-Cab Credit Union – one of eight Credit Unions that failed in 2018/19 – and the largest deposit taker failure since the crisis. To cover the failure of Dial-A-Cab, FSCS raised a supplementary levy on the Deposits class of £13 million in January 2019.
Caroline Rainbird, FSCS’s Chief Executive, said: “We recognise that we were only able to pay compensation to so many thousands of people because of the firms who paid our levy, and the diligent work of FSCS staff who successfully pursued recoveries from the estates of failed firms. Our customers, the wider financial services industry and consumers, are always central to our decision-making process.
“As we continue to see a rise in SIPP related claims we are working with our partners in industry through our Prevent pillar to gain valuable insight into the causes of firm failures and about the directors and advisors involved in mis-selling.”