In its annual report, the FSCS said this was £500,000 lower than the compensation payment made the year before, due to a 52% fall in new claims.
There were 139 new claims in 2023/24, down from 289 the year before. Some 9% of claims were upheld, similar to the 8% upheld previously.
The average compensation value per claim also decreased from £24,000 in 2022/23 to £13,000 in 2023/24.
Approximately £180,000 of the compensation paid for home finance intermediation, which includes mortgage brokers, was for claims against Principal Mortgage Services, a firm that was declared in default in 2011.
A further £20,000 went towards claims against Pave Financial Management, which was declared in default in 2012.
Mortgage lenders also contribute to the levy paid by mortgage advisers if needed, but this was not required in 2023/24.
Additionally, the FSCS paid firms in the home finance provider and intermediation classes a £5m refund, as surpluses carried over from 2022/23 were not required during the year.
No new general insurance advice failures
The FSCS report showed there were no new firm failures within the general insurance distribution class and the compensation paid mostly related to legacy failures.
More than half of the £600,000 compensation paid was to customers of Norton Insurance Services, which was declared in default in 2012, and The Mortgage Matters Partnership, which was declared in default in 2019.
Compensation costs for this class were around £1m lower than the previous financial year and 50% fewer claims were made. There were 314 claims, down from 628 previously.
Some 65% of decisions were upheld, similar to the 68% uphold rate the year before. The average compensation paid in 2023/24 was £2,250, down from £2,694.
The FSCS said in past years, many of the claims were for payment protection insurance (PPI) policies, but most of these had now been resolved.
FSCS pays £423m to customers
In total, the FSCS paid out £423m in compensation to customers during 2023/24.
It raised £270m through its levy, and said the compensation paid over the year was below forecast so surpluses in several classes were brought forward to offset the 2024/25 levy. In 2023/24, management expenses were £98m in comparison to £86m in 2022/23.
Martyn Beauchamp, FSCS’ interim chief executive, said: “Our focus during 2023/24 was on strengthening our core operation while investing in our future readiness.
“We continued to adapt our service to handle increasingly complex activity. In 2019, 31% of our claims were what we would class as straightforward; for example, for mis-sold PPI. That number is now approximately 5%. Meanwhile, the proportion of more complex claims, mainly linked to customers’ retirement savings, has increased from around a third to two-thirds.”
He added: “This has resulted in the amount of evidence we receive per claim increasing by 89% since 2021/22. At the same time, we are dealing with larger and more multi-faceted failures such as self-invested personal pension [SIPP] operators that require more time, expertise and resource[s] to investigate.
“In April, we opened our in-house contact centre, which puts customer conversations at the heart of our office. This is the beginning of a wider strategy to grow our in-house expertise so we can effectively manage the more complex claims that now make up most of our work.”
Beauchamp continued: “This shift towards more internal capability will strengthen our control over customers’ experiences while continuing to deliver cost-efficiencies for levy payers. We laid the foundations for this in 2023/24 and continue to make good progress.”
The FSCS has set the levy at £265m for 2024/25 with no charges to mortgage intermediaries.
