Mortgage intermediaries will not be required to pay an annual levy to the Financial Services Compensation Scheme (FSCS) for 2025/26, as no new firm failures are expected.
In its spring outlook, the FSCS said compensation payments were forecast to be around £250,000 and applied to failures that had already happened. The home finance intermediation class is also expected to close the year with a surplus of £200,000.
Firms in the general insurance intermediation class will also pay no levy.
The total levy has been reduced by £38m since the FSCS’ last forecast in November to £356m for the 2025/26 financial year.
The organisation said it successfully recovered more than £56m, which was higher than originally expected, which helped to reduce the levy.
It expects to pay £332m in compensation to customers during 2025/26, £36m lower than previously forecast.
Friend or foe? The role of AI in mortgage administration
Sponsored by Pepper Money
The FSCS said the reduced levy was due to lower compensation costs expected in the life distribution and investment intermediation class, as well as the recoveries made.
Martyn Beauchamp, chief executive of the FSCS, said: “In 2024/25, we had another strong year of recoveries, recouping more than £56m from the estates of failed firms and relevant third parties. This led to higher opening balances carried forward from 2024/25 in certain classes. These recoveries put money back into the financial services sector and to the customers who use it, helping to build trust and confidence in the sector.
“We have now fully transitioned to our new claims service operating model. We delivered a high volume of customer claim decisions last year while maintaining our strong customer satisfaction and quality scores, and our aim is to continue this combination of deep purpose and high performance through the 2025/26 financial year.”
