Brokers faced with supplementary compensation levy

January 2021

Following the complex failure of London Capital & Finance, an increase in pension advice claims and other exceptional costs, the UK’s Financial Services Compensation Scheme (FSCS) estimates the Life Distribution & Investment Intermediation (LDII) class requires £92m of additional funding in the form of a supplementary levy. This amount is more than the annual maximum that FSCS can raise from this class. Therefore, FSCS will source £8m from the LDII class and £33m from surpluses across other classes. It will then call for an additional £51m mainly from the retail pool. The retail pool is a separate pot to which all classes are required to contribute and is only used when one class exceeds its annual levy limit.  Insurance intermediaries fall into the GI distribution class which is expected to contribute £29m to the retail pool.  The supplementary levy should be confirmed in January 2021 and invoices will be issued to firms shortly afterwards.

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