Financial lifeboat scheme expects to pay £363m in compensation in 2024-25

Surplus funds have helped to offset the 2024-25 levy on firms, the Financial Services Compensation Scheme said.

The Financial Services Compensation Scheme has said it expects to pay £363 million in compensation during 2024-25 (Dominic Lipinski/PA) (PA Archive)

A financial lifeboat scheme has said it expects to pay £363 million in compensation during 2024-25.

The Financial Services Compensation Scheme (FSCS), which is funded by the financial services industry, said the total levy payable by firms for the 2024-25 financial year amounts to £265 million, marking a small decrease from the final 2023-24 levy of £270 million.

The scheme protects customers of authorised financial services firms if they fail or have stopped trading. It gives certain protections for products including bank deposits, investments, pensions, insurance and funeral plans.

The FSCS said surplus funds have helped to offset the 2024-25 levy.

In some classes we upheld fewer claims than expected in 2023-24

Martyn Beauchamp, FSCS

Martyn Beauchamp, interim chief executive of FSCS, said: “We made a number of successful recoveries in 2023-24, with more than £54 million recovered from the estates of failed firms and other third parties.

“This has added to surpluses in some funding classes being carried forward. We’ve used these surpluses to reduce the levy for 2024-25 to £265 million.”

In a statement published on the FSCS website, Mr Beauchamp said: “In some classes we upheld fewer claims than expected in 2023-24.

“The amount of compensation paid on some claim types was also lower, impacted by the broader economic conditions. To illustrate, the average compensation amount on pension transfer claims was around £35,000 in 2023/24, whereas in 2022/23 it was almost 30% higher at around £45,000.”

The timing of larger failures also impacted the number of claims the FSCS was able to complete during 2023-24, he said.

The FSCS’s annual report, which will be published in the summer, will include full details of its performance and claims figures for 2023-24.