FSCS's new funding proposal would add millions to advisers levy

The FSCS has published a consultation paper in which it proposed to calculate each year's levy based on the average of the expected compensation costs of the coming three years.

The scheme argued that this way would make the system less volatile. It said: "Taking a 36-month view of expected costs may allow FSCS to reduce the volatility of annual levies, reduce the likelihood of interim levies, and give the industry greater certainty."

Costs for some would go up under the new system. For instance, the FSCS calculated that costs for insurance intermediaries would go up by around £18m, from £52m to almost £70m and the levy for investment intermediaries would rise from £98m to £100m.

Although others, such as life and pensions intermediaries would see their levies fall from £46m to £24m if calculated in the new way, they would still effectively pay the higher fee, as the FSCS has reserved the right to take a levy based on one year if the figure was greater than the average of three years.

The FSCS said: "[The new approach] involves taking a forward view of the next 36 months' expected compensation costs and levying one third of that amount each year, unless the costs in the next 12 months are expected to be higher (in which event, that is the amount levied)."

The FSCS is accepting industry responses to the proposal until the end of July. The new model would take effect in April next year.

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• Topics
• Regulation
• FSCS
• levy
• fees