According to an announcement made by the U.K. Financial Services Compensation Scheme (FSCS), the bill for reimbursing Alpari UK clients is likely to reach £28 million ($42.7 million). The institution in charge with reimbursing depositors whose brokerages have sought bankruptcy protection expects the bill to be paid in the 2015/16 reporting period.
The compensation scheme has also announced that the volume of (self-invested personal pensions) SIPP related claims is continuing to rise. The current amount of the levy of the FSCS is £319 million which is higher by £32 million from the figure forecasted by the institution in January.
The increase is not in any way related to the bankruptcy of Alpari UK. On the contrary, the FSCS expects that compensations related to brokers will mark a decrease in their levy bill. The forecast is based on a reduction in the costs relating to other investment defaults, and expectations for a rise in recovery forecasts in 2015. All assumptions and forecasts have included Alpari UK.
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The institution will levy firms in the life and pensions intermediation sector £100m in 2015/16 to fund the compensation costs for the rising claims related to SIPPs.
Commenting on the announcement, the Chief Executive of the U.K. FSCS, Mark Neale said, “FSCS protects consumers when financial firms fail. We’re there for people who have nowhere else to turn. The annual levy allows us to compensate consumers, and as a result, make a valuable contribution to consumer confidence.”
The FSCS is funded by a levy on authorized financial services firms. It does not charge individual consumers for recovery of their funds.