PIMFA, the trade association for wealth management, investment services and the investment and financial advice industry, has welcomed the forecast reduction in the Financial Service Compensation Scheme (FSCS) levy for 2023/24 to £270m announced today. This is clearly extremely welcome news and firms will surely be pleased.
However, in the longer-term, a solution to the compensation framework still needs to be found, as has been previously acknowledged by the Financial Conduct Authority, and PIMFA would still urge the Regulator and Government to work with us to find that solution.
Simon Harrington, Head of Public Affairs at PIMFA, commented:
“The news that the Financial Services Compensation Scheme (FSCS) levy is forecast to fall to £270m in 2023/24 is extremely welcome and will come as a relief to all well-run financial services firms.
“Every consumer who finds themselves having to use the FSCS to receive redress is a consumer who has received a bad outcome that it would have been better to avoid in the first place.
“It is therefore extremely pleasing to see that fewer consumers have found themselves in need of help from the FSCS in the past year, leaving the FSCS with a forecasted surplus from 2022/23.
“Moreover, given the FSCS levy represents one of the few uncontrolled costs faced by well-run firms each year – and therefore it has a significant financial impact on them – any reduction in the levy, and let us be clear the forecast for next year represents a significant reduction, is clearly welcome news.
“While this reduction represents good news in the short-term, we still have medium to long term concerns about the future compensation framework and the costs that are likely to inevitably arise from pension freedoms and the covid pandemic. It is therefore likely that today’s forecast represents short-term respite for firms.
“As costs rise, it is vital that the Treasury recognises the burden placed on well-run firms. We would still urge the Regulator and more importantly, the Treasury to consider a longer-term solution that uses alternative sources of funding. Financial Conduct Authority (FCA) fines, which are currently diverted to the Exchequer remain a sizeable source of income which would be consistent with our, the FCA’s and wider industry’s view that the polluter should pay.”
