In its annual report for 2022/2023, the FSCS said it incurred less costs than expected which resulted in surpluses for some classes and an increase in its overall balance.
Most of the surpluses will be carried over to 2023/2024 but FSCS does not expect to use it all.
The home finance provision class, which includes mortgage lenders, will also be given a £1m refund, while the firms in the debt management class will receive £500,000.
A drop in mortgage advice-related claims
During the year, £129,000 was paid out for claims against the home finance intermediation class in relation to the failures of FSP and Rajan Business Centre.
In total, £676,000 was paid out to customers within this sector with the remainder covering firm failures from previous years.
The amount of compensation paid was £303,000 lower than the previous financial year.
There were 289 new claims made against the home finance intermediation class, down from 397 in the last financial year. Some 28 decisions were upheld at a rate of eight per cent, down from 52 last year when there was an uphold rate of 11 per cent.
The average compensation paid out was higher at £24,154 in 2022/2023 compared to £19,330 the previous year.
The compensation costs relating to the general insurance distribution class came to £2m which was £5m lower than the previous financial year. The FSCS said this was due to there being no new firm failures.
Some 40 per cent of the compensation paid was related to legacy failures. There were 628 new claims against the general insurance distribution class in 2022/2023, down from 7,368 in the previous year. Some 623 complaints were upheld with an average payout of £2,694, compared to 7,294 decisions upheld the year before with an average compensation payout of £1,214.
Compensation costs at £403m
The FSCS helped approximately 68,000 customers and paid out £403m in compensation in 2022/23. It also received £434m in levy income.
The majority of claims were in relation to investment and pension advice, as well as self-invested personal pension (SIPP) operator failures. There were also a number of claims paid out to customers for insurance firm failures from previous financial years.
FSCS either paid customers compensation or enabled them to transfer to a new financial provider for their investment or insurance policy.
Publishing its annual report, the FSCS said it had paid compensation to customers who had experienced losses from 563 different authorised financial services firms, including 64 the FSCS declared in default in 2022/23.
In total, more than 430 firms were investigated to confirm their solvency status, and to confirm whether any of their former customers would have eligible claims.
Uncompensated losses on upheld pensions claims amounted to more than £75m.
Fiona Kidy, FSCS’ chief financial officer, said: “The past year has been dominated by the rising cost of living, which in turn has also led to a greater focus on people’s personal finances. In connection to this, there has also been a greater focus on the protection that FSCS and other organisations offer.
“Highlighting the importance of FSCS protection and our limits was the near insolvency of Silicon Valley Bank UK Ltd (SVB UK) at the end of the financial year. During March, our bank and savings protection checker received more than 100,000 checks in a single week. This is approximately four times the usual amount.
“Although FSCS ultimately did not need to step in, I’m very proud that my colleagues pulled out all the stops to ensure we were ready to help SVB UK’s customers.
“As ever, we look forward to the year ahead safe in the knowledge that we are prepared for any challenges that may arise. FSCS will continue to play an important role in building consumer trust and confidence in financial services.”
