Investment advisers get £6m cut from FSCS levy

The FSCS has trimmed £6m off its earlier estimates for investment advisers' annual levy and the amount will instead be paid by the life and pensions intermediation sub-class.

In an update, the FSCS said its 2011/12 annual levy for the investment intermediation sub-class had dropped from £40m to £34m.

The FSCS had projected the £40m figure in its Plan and Budget, published in February but the costs have now been allocated to the life and pensions intermediation sub-class.

Its levy for that class has increased from £10.5m to £21.5m as a result, and to cover what the FSCS expects to be a continuing flow of mortgage endowment and pensions claims.

The FSCS says: "The increase in the compensation costs, and hence the levy for this sub-class [life and pensions intermediation] is based on a more up-to date analysis of claims paid to date in 2010/11.

"This showed a greater proportion of claims from life and pensions intermediation activities, and not investment intermediation activities, than in previous years."

The FSCS says all other claims assumptions for the investment intermediation sub-class remain broadly unchanged from those announced in the Plan and Budget 2011/12.

"No major defaults are allowed for in our forecasts, but we do expect to continue to receive stock broking and investment advice claims," it says.

The FSCS also upped its predicted compensation costs to the investment adviser sub-class, for the year to 30 June 2012, by £2.4m to £95.6m.

The Scheme is holding £67.8m in funds to pay out compensation for this class, which it says it will distribute to investors, mainly linked to Keydata products, by the end of June.

It will use the latest levy to pay the outstanding balance over the next year.

The FSCS expects investment intermediation to have 3,568 new compensation claims against it this year, down from a projected 4,010.

It has also downscaled the number of decisions on compensation it expects to make this year, from 6,841 to