The Financial Services Compensation Scheme (FSCS) has confirmed it will increase its levy to £407m for the period 2018/19, due to rising defined benefit transfer claims.
In a publication released by the FSCS today, 1 May 2018, FSCS chief executive, Mark Neale wrote that it would be increasing the levy by £71m more than £336m forecast for the nine months to June 2019, mostly because of a £52m increase in the life and pensions intermediation levy.
The body also said that a £10m increase can be attributed to Active Wealth and other firms which were advising British Steel workers.
Neale said: “Although we are yet to see claims volumes, or values, we do think it appropriate to make a substantial allowance for these firms.
“The total deficit forecast in the life & pensions intermediary class is £64m, which will be levied on the retail pool.”
The FSCS' original forecast for the nine-month period to June 2019 was £286m, with the retail pool expected to contribute £12m, however this was increased to £52m “wholly a result of transfer claims”.
Neale added: “Stepping back from these numbers, I once again draw attention to the steady increase in claims and compensation costs related to retirement saving. Risks rise as people make increasingly complex choices about the investment of their pension pots, even where investors take the sensible step of taking independent professional advice.”
Furthermore, the FSCS reiterated its decision to put three SIPP operators in default, after it received approximately 150 claims for compensation against Brooklands Trustees Limited, Stadia Trustees Limited and Montpelier Pension Administration Services Limited.
The FSCS said it now expects compensation costs to total £34m in order to plug the deficit created by growing SIPP-related claims against life and pensions advisers.