In 2025/26, the compensation paid to customers comprised £1.1m for claims of unsuitable remortgage advice against Principal Mortgage Services, which was declared in default in 2011.
The total paid was around £1.1m more than the £500,000 paid in 2024/25, due to a higher volume of decisions made over the year. The FSCS said a higher number of claims decisions were upheld, but this was partially offset by the average compensation claims falling from £27,000 to £23,000.
There were 94 new claims made against the home finance intermediation class in 2025/26, up from 90 the year before, with 70 decisions upheld compared to 20 previously. This resulted in an uphold rate of 41%, up from 18%.
Mortgage advisers paid no levy during the year, as the FSCS carried over surpluses from previous years to cover costs. This included a £5m refund paid to firms due to surpluses carried over from previous years. The surpluses were fully used in 2025/26, leaving the home finance intermediation class with a deficit of £2.4m, driven by higher claims volumes and management costs.
The FSCS said a levy would be needed in the next financial year to cover costs for mortgage advisers. Where required, mortgage advisers contribute to the retail pool if other sectors breach their annual levy limit, but no contribution was required from the home intermediation class over the year.
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Insurance and investment brokers account for largest compensation cost
The total compensation paid for claims against the life distribution and investment intermediation class rose from £110m to £125m year on year, with the majority relating to claims against unsuitable investment, pension and SIPP advice.
There were no new firm failures within the general insurance distribution class, and around £700,000 was paid to customers for legacy firm failures, flat on the year before.
Most claims related to payment protection insurance (PPI), and more than three-quarters of the compensation paid was in relation to unsuitable advice claims against The Mortgage Matters Partnership, which was declared in default in 2019.
In total, the FSCS paid £267m in compensation to customers, accounting for 14,000 individuals.
Martyn Beauchamp, chief executive of FSCS, said: “When firms fail, confidence matters. FSCS provides that confidence by helping people receive compensation as quickly as possible and maintain access to essential financial services. 85% of people who know about FSCS say it increases their trust in the financial system. That trust helps people make informed decisions about saving and investing.
“Over the past year we delivered for customers when they needed us most, supporting those affected by firm failures, implementing the increased protection limit for savers and pursuing recoveries that help reduce costs for levy payers.
“Our new strategy builds on that momentum, setting a clear direction for the future. It strengthens our readiness and resilience and helps us make better use of data and technology. Working closely with regulators and industry, it ensures we continue to support financial stability by giving consumers confidence, continuity and compensation when firms fail.”
