FSCS publishes its 2020/21 Annual Report and Class Statements
The Financial Services Compensation Scheme (FSCS) helped more than 52,000 customers (see Notes for Editors) across the UK to get their lives, families and businesses back on track during 2020/21. FSCS either paid customers compensation or enabled them to transfer to a new financial provider for their investment or insurance policy.
In its Annual Report and Accounts and Class Statements published today (Thursday 1 July 2021), FSCS outlines the vital work it carried out during the past financial year. FSCS provides a trusted compensation service for consumers, which also helps raise public confidence in the UK’s financial services industry.
Among the highlights:
- The financial year 2020/21 was FSCS’s most productive operational performance year to date despite an increase in the number of complex claims and remote working by FSCS’s people due to Covid-19. This included 99,528 claims decisions being made, of which more than 52,000 resulted in either paying people compensation or helping them transfer to a new investment or insurance policy.
- FSCS paid compensation to customers who had experienced losses from 1,131 failed firms, including 92 firms that failed during 2020/21.
- FSCS achieved its highest-ever customer satisfaction score of 86 per cent and its 12-month average increased by five per cent on 2019/20 to 84 per cent – demonstrating our commitment to delivering an outstanding customer experience for those who claim with FSCS.
- The vast majority (98 per cent) of customers who came directly to FSCS did so using its online claims service and those who came directly received 100 per cent of the compensation they were owed.
- FSCS’s compensation costs for the year were £584m, an increase of £57m from 2019/20 (£527m).
- FSCS continued to reduce its operating costs, with like-for-like costs of handling claims decreasing by three per cent in 2020/21. This was on top of the eight per cent reduction in like-for-like claims handling costs in 2019/20.
- The use of artificial intelligence and automation enabled FSCS to avoid approximately £9m in claims handling costs.
- A total of 31,737 claims were automatically processed, making the experience simpler and faster for FSCS customers.
- In 2020/21, FSCS was financed by levies from 45,227 regulated financial services firms.
- FSCS has achieved the Investors in People (IIP) gold standard, a people management standard achieved by only 17 per cent of IIP accredited organisations.
Caroline Rainbird, FSCS’s Chief Executive, said: "I am very proud of how our people smoothly adjusted to working from home early on in the first lockdown – without losing a day of service – and continued to put our customers first throughout the year.
"Receiving our highest-ever customer satisfaction score of 86 per cent in a month would be a great achievement at any time. But to gain this in one of our busiest years and during a global pandemic is a tribute to the incredibly hard work of everyone at FSCS.
"In 2020/21 92 firms failed and FSCS paid £584m in compensation. While I am proud of our response to the demands this presented, I am saddened that this represents more difficulties for consumers and a rising levy.
"Several factors have caused the levy to increase, including an ongoing rise in complex pension advice claims; compensation payments related to London Capital & Finance plc (LCF); and more self-invested personal pension (SIPP) operator failures.”
Caroline Rainbird added: "I have said before that the levy is far too high, and we must take swift action with the industry and regulators to tackle the causes of the increase. We have been looking at how we can use our data and knowledge to help provide solutions and are working closely with the FCA on this. We meet with the industry regularly to discuss how we can better understand why firms fail and help to reduce future levy bills.
"As well as putting forward policy proposals for better outcomes in the consumer investment market, we continue working with the wider industry in the fight against scams, sharing our unique data and knowledge with the FCA and others as appropriate to help identify and act against those profiting from consumer misery.
"All in all, 2020/21 has been a very challenging year. We still have a way to go to take the action needed to tackle the rising levy, as well as reducing consumer harm. I look forward to continuing to work with our regulatory partners, stakeholders and industry, and to seeing the progress we can make together this year."
FSCS’s Annual Report and Accounts and Class Statements are available to download as pdfs from the Annual Report web page.
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Notes for Editors
FSCS helped 52,623 customers get back on track in 2020/21. The number of customers helped varies depending on the types of firms that have failed during the year. For example, in 2019/20, FSCS helped more than 250,000 customers as it dealt with some large insurance failures involving tens of thousands of policyholders.
FSCS is the UK's statutory compensation scheme that protects customers of authorised financial services firms that carry out certain regulated activities. FSCS protects deposits, investment business, home finance (mortgage) advice, general insurance, insurance broking and debt management. FSCS can pay compensation if an authorised firm is unable to pay back money it owes its customers in connection with a regulated activity. FSCS was set up by Parliament in 2001 and is a non-profit organisation funded by the financial services industry.
Declaring a firm in default
Before FSCS can pay compensation, it must be satisfied that a firm does not have sufficient assets to meet claims. It describes this as being ‘in default’. FSCS will declare a firm in default if it has received at least one claim; and is satisfied that the financial services firm which has failed is unable to return money to eligible claimants itself.
FSCS is required to do this before it can pay compensation to eligible claimants.
Declaring a firm in default allows private individuals who have suffered actual financial loss as a result of their dealings with that firm to apply to FSCS. Some businesses and charities may also be eligible, depending on the type of claim.
Dealing with a Financial Conduct Authority (FCA) or Prudential Regulation Authority (PRA) authorised firm that is carrying out certain authorised activities gives consumers access to the Financial Ombudsman Service for trading firms and FSCS for failed firms Consumers can check that the firm they are dealing with is authorised by using the FCA’s Financial Services Register.