The Financial Services Compensation Scheme (FSCS) will levy firms £532m this year – £16m more than forecast for 2019/20 in January.
The total includes management expenses of £74.6m.
In the Insurance and Home Finance sector, which concerns mortgage brokers, the final levy was not materially different from the indicative levy. The FSCS said in January it expected brokers to contribute just £4m – an 80 per cent drop from the previous year.
But the FSCS explained one key assumption about this sector, saying: “Mortgage Matters Partnership was declared to have failed (in default) in January and could generate up to 5,000 claims.
“From the information we have received so far, we expect approximately two-thirds of the claims to be PPI (General Insurance Distribution) and one-third mortgage advice (Home Finance Intermediation).”
Pensions claims drive increase
The main reasons for the overall increase (£16m) between the forecast and the final levy is the uplift in the number of claims expected against self-invested personal pensions (SIPP) operators and an upwards revision to the expected continuing costs in historic insurances failures.
The FSCS said the main driver of compensation costs this year would be pension claims, just as they were last year, arising from bad advice to transfer retirement savings and invest in risky and illiquid assets.
Mark Neale, outgoing FSCS CEO, said: “These trends underline the importance of the greater weight which FSCS intends to give in its strategy for the 2020s to both promoting awareness of FSCS protection and to preventing the mis-selling and advice failures which underlie these costs.”
He added: “We shall need the support of our partners in the industry and in the FCA in both respects.”