The Financial Services Compensation Scheme paid out £423mn in compensation to consumers during 2023/24 as claims become “more complex”.
In its annual report published today (July 31) the lifeboat scheme revealed it recovered £54mn from failed firms which the majority was used to offset FSCS levies for firms.
It also highlighted paying compensation to customers who had experienced losses from 447 different authorised financial services firms, including the 51 the FSCS declared in default during 2023/24.
This comes as Martyn Beauchamp, interim chief executive, said compensation claims were becoming “more complex”.
“In 2019, 31 per cent of our claims were what we’d class as straightforward to deal with, mainly mis-sold PPI. That number is now approximately 5 per cent.
“Meanwhile, the proportion of more complex claims, mainly linked to customers’ retirement savings, has increased from around a third to two-thirds of our claims workload. This has resulted in the amount of evidence we receive per claim increasing by 89 per cent since 2021/22,” he added.
Beauchamp also highlighted that the FSCS was dealing with larger and more multi-faceted Sipp operator failures that required “more documentation, time, expertise and resource” to investigate.
The lifeboat scheme confirmed it closed out 14 complex firm investigations which averaged 15 months of work and resulted in the decision that all but one was owed compensation.
Year of transition
The FSCS said the next year will mark a “vital transition year” for the lifeboat scheme.
It confirmed that in 2024/25 it will recruit and embed new teams and strengthen its core claims service.
As well as focusing on making recoveries to help reduce the levy for industry and to allow to pay additional compensation to customers.
Beauchamp also highlighted that the FSCS was investing in technology as it transitioned to a new claims management model.
“In April we opened our in-house contact centre which puts customer conversations at the heart of our office. This is the beginning of a wider strategy to grow our in-house expertise so we can effectively manage the more complex claims that now make up most of our work.
“This shift towards more internal capability will strengthen our control over customers’ experiences while continuing to deliver cost-efficiencies for levy payers. We laid the foundations for this in 2023/24 and continue to make good progress,” he added.
alina.khan@ft.com
