IFAs in the Financial Services Compensation Scheme's (Fscs) pension review contribution group will be unlikely to pay levies from next year.
The Fscs’s Annual Report says claims about the pension review are coming to an end and, as a result, the scheme expects the 2006/07 levy of £25m will be the last for this contribution group.
Heather Tilston, head of communications at the Fscs, states: “The pensions review is coming to an end because it has gone on for some time. The regulator and most firms have finished their reviews and there are very few claims left. We anticipate it will be the last levy for this group, but obviously if there are any significant claims we will have to fund them.”
During the year 2,250 new pensions review claims were received and 4,900 decisions were issued – an increase of 25% over 2004/05.
Of those decisions 81% resulted in an offer of compensation, the average payment being £22,700.
The report also reveals a major issue for the Fscs has been split capital investment trusts, but it says the impact of potential claims is still uncertain because of the difficulties in determining the nature of claims and the cause of any losses.
It adds: “Levy payers should note that we do still anticipate the need to levy for split claims, but the timing and size of the levy, and where levies should be allocated, remains too uncertain to forecast.”
A total of 22,250 new investment claims were received during the year – an 87% increase over the previous year – and the majority related to mortgage endowments.
The Fscs received 20,100 mortgage endowment applications during the year and completed 16,000 claims, of which 46% resulted in an offer of compensation.
It states: “We committed to completing mortgage endowment claims received before 1 October 2005 against firms in default by 31 July 2006. We are currently on track to achieve this. For new claims received after this date we aim to reduce turnaround time for new mortgage endowment claims to six months, where a firm has been declared in default.”
In addition, the Fscs completed 3,150 precipice bond claims, 84% of which resulted in an offer of compensation, and 1,500 general investment claims, of which 40% resulted in an offer of compensation.
Overall it received 25,100 applications and completed 25,789 claims – a 180% increase on the previous year.
The Fscs says the increase resulted from strategies to deal with surges in the number of endowment claims received by the scheme.
It paid out a total of £201.22m of compensation to consumers in 2005/06, compared to £174.71m in 2004/05.
Loretta Minghella, chief executive of the Fscs, says: “A year ago the Fscs was facing a rising backlog of claims, driven by the rise in endowment complaints. We have a commitment to consumers that we would put in place measures to deal with this rise in claims, and promised that we would complete 15,000 endowment claims in the financial year. We have delivered on this promise, and exceeded it – we completed 16,000 endowment claims in the year.”
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Emily Perryman on 020 7968 4554 or email [email protected].IFAonline
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