PIMFA welcomes reduction in FSCS levy but a longer term solution to the compensation framework is still required

25 May 2023

PIMFA welcomes reduction in FSCS levy but a longer term solution to the compensation framework is still required

PIMFA, the trade association for the wealth management, investment services and the investment and financial advice industry, has welcomed the forecast reduction in the Financial Service Compensation Scheme levy for 2023/24 to £270m announced today. This is clearly extremely welcome news and firms will surely be pleased.

However, in the longer-term, a solution to the compensation framework still needs to be found, as has been previously acknowledged by the Financial Conduct Authority, and PIMFA would still urge the Regulator and Government to work with us to find that solution.

Simon Harrington, Head of Public Affairs at PIMFA, commented: “The news that the Financial Services Compensation Scheme (FSCS) levy is forecast to fall to £270m in 2023/24 is extremely welcome and will come as a relief to all well-run financial services firms.

“Every consumer who finds themselves having to use the FSCS to receive redress is a consumer who has received a bad outcome that it would have been better to avoid in the first place.

“It is therefore extremely pleasing to see that fewer consumers have found themselves in need of help from the FSCS in the past year, leaving the FSCS with a forecasted surplus from 2022/23.

“Moreover, given the FSCS levy represents one of the few uncontrolled costs faced by well-run firms each year – and therefore it has a significant financial impact on them – any reduction in the levy, and let us be clear the forecast for next year represents a significant reduction, is clearly welcome news.

“While this reduction represents good news in the short-term, we still have medium to long term concerns about the future compensation framework and the costs that are likely to inevitably arise from pension freedoms and the covid pandemic. It is therefore likely that today’s forecast represents short-term respite for firms.

“As costs rise, it is vital that the Treasury recognises the burden placed on well-run firms. We would still urge the Regulator and more importantly the Treasury to consider a longer-term solution that uses alternative sources of funding. Financial Conduct Authority (FCA) fines, which are currently diverted to the Exchequer remain a sizeable source of income which would be consistent with our, the FCA’s and wider industry’s view that the polluter should pay.”

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Notes for Editors

About PIMFA – the Personal Investment Management & Financial Advice Association

• PIMFA has been named one of the best places to work in the UK. Find our more here.
• PIMFA is the trade association for firms that provide wealth management, investment services and the investment and financial advice to everyone from individuals and families to charities, pension funds, trusts and companies.
• The sector currently looks after £1.65 trillion in private savings and investments and employs over 63,000 people.
• PIMFA represents both full and associate member firms. Full members provide a range of financial solutions including financial advice, portfolio management, as well as investment and execution services. They assist everyone from individuals and families to charities and pension funds, all the way to trusts and companies.  Associate members provide professional services to the PIMFA community.
• PIMFA leads the debate on policy and regulatory recommendations to ensure that the UK remains a global centre of excellence in the wealth management, investment advice and financial planning arena. Our mission is to create an optimal operating environment so that its member firms can focus on delivering the best service to clients,has bee providing responsible stewardship for their long-term savings and investments. 
• PIMFA has made numerous recommendations to the FCA regarding the Future of Advice, Future of Supervision and the FSCS levy – read more.
• PIMFA was created in 2017 as the outcome of a merger between the Association of Professional Financial Advisers (APFA) and the Wealth Management Association (WMA) with a history as a trade association since 1991 – read more.
• Further information can be found at pimfa.co.uk

Contact

For further information on this release or other press matters please contact:

Matthew West, PIMFA PR Manager – MatthewW@pimfa.co.uk, +44 (0)20 7382 0376

Sheena Gillett, PIMFA Communications & PR Director – sheenag@pimfa.co.uk, +44 (0)20 7011 9869 / +44 (0)7979 493225