The Financial Services Compensation Scheme (FSCS) has paid out £584 million in compensation helping 52,623 (1,131 firms) families and businesses in the past year (2020/21). The FSCS has either paid customers compensation or enabled them to transfer to a new financial provider for their investment or insurance policy.
The latest figures compare to £527 million in 2019/20.
The majority of this year’s figures, £323 million, went to life distribution and investment intermediation, while £2 million went to home finance intermediation.
Caroline Rainbird, FSCS’s Chief Executive, said “I am very proud of how our people smoothly adjusted to working from home early on in the first lockdown – without losing a day of service – and continued to put our customers first throughout the year.”
“Receiving our highest-ever customer satisfaction score of 86 per cent in a month would be a great achievement at any time. But to gain this in one of our busiest years and during a global pandemic is a tribute to the incredibly hard work of everyone at FSCS.”
“In 2020/21 92 firms failed and FSCS paid £584m in compensation. While I am proud of our response to the demands this presented, I am saddened that this represents more difficulties for consumers and a rising levy.”
“Several factors have caused the levy to increase, including an ongoing rise in complex pension advice claims; compensation payments related to London Capital & Finance plc (LCF); and more self-invested personal pension (SIPP) operator failures.”
Caroline Rainbird added: “I have said before that the levy is far too high, and we must take swift action with the industry and regulators to tackle the causes of the increase. We have been looking at how we can use our data and knowledge to help provide solutions and are working closely with the FCA on this. We meet with the industry regularly to discuss how we can better understand why firms fail and help to reduce future levy bills.”
“As well as putting forward policy proposals for better outcomes in the consumer investment market, we continue working with the wider industry in the fight against scams, sharing our unique data and knowledge with the FCA and others as appropriate to help identify and act against those profiting from consumer misery.”
“All in all, 2020/21 has been a very challenging year. We still have a way to go to take the action needed to tackle the rising levy, as well as reducing consumer harm. I look forward to continuing to work with our regulatory partners, stakeholders and industry, and to seeing the progress we can make together this year.”