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FSCS expects to double 2016/17 mortgage broker levy

  • 20/01/2016
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FSCS expects to double 2016/17 mortgage broker levy
The Financial Services Compensation Scheme (FSCS) is proposing to double the levy imposed on mortgage intermediaries to £10m in 2016/17, up from £5m a year earlier.

In its 2016 Plan and Budget report, the FSCS said it expected to see similar claims volumes in the home finance intermediation sector as the year before, but noted that it was starting to see an increase in claims eligible for compensation. These are often in relation to negligent advice to borrow for investment in overseas property schemes.

The FSCS has pitched its claims assumptions for home finance advice in 2016/17 at 600, up slightly from 559 last year.

Forecasts suggest customers will receive compensation payouts of £7.02m from issues related to home finance advice this year.

Earlier this week the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) published a joint consultation paper recommending that the FSCS’s total management expenses levy should fall by 2.5% to total £72.7m. The proposed management expenses budget will be made up of £23.4m in base costs and £44m in specific costs, according to the consultation.

Last year, the FSCS came under fire after Personal Touch Financial Services (PTFS) was forced to alert its members of an imminent fee hike due to retrospective action taken by the FSCS to impose an additional levy on firms.

PTFS’s sales and marketing director David Carrington blamed the increase on the levy for life and pensions which covers protection, the reason mortgage advisers are liable to pay the charge.

Claims relating to pensions are likely to continue rising this year, according to the FSCS. The scheme explained this was largely due to ongoing claims against advisers in relation to advice given to transfer funds from existing pension schemes to self-invested personal pensions.

The report said: “We expect to see further claims in this category along with other types of life and pension claims throughout 2016/17. However, there remains uncertainty as to the number and value of claims that FSCS will see going forward, which will impact on costs to the industry. FSCS will update the industry on developments.”

Despite this, the levy for life and pensions intermediation will drop from £100m to £80m in 2016/17.

Mark Neale, FSCS chief executive, said the scheme was committed to modernising its claims handling system and pushing ahead with changes to ‘make life easier’ for consumers.

“An online portal, through which they can submit claims, is being tested. In time, it will provide a more efficient service that, ultimately, transforms customers’ experience. Overall, we’re moving towards streamlining our claims, reducing management and operating costs, which benefits our levy payers, and creating a better experience for consumers,” he said.

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