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FSCS paid out £200m to investment claimants

Consumers who lost money through the collapse of a financial services company received more than £200m in compensation during the past year, figures showed.

The Financial Services Compensation Scheme (FSCS) said it paid out a total of £204m to more than 21,000 claimants during the year to the end of March.

The group received a total of 31,592 claims during the year, 185,000 more than during the previous 12 months, of which 21,802 were completed.

Two-thirds of the total compensation bill went to people who had either lost money through the collapse of an investment firm, or who were mis-sold controversial payment protection insurance (PPI), but could not claim against the company that sold them the policy because they had gone out of business.

The FSCS said the number of PPI claims it received had increased significantly during the year to reach 2,400, and it expects the number to continue to rise during the current financial year.

PPI covers debt repayments if the holder is unable to work due to an accident or illness, or if they lose their job.

But the cover has come in for heavy criticism in recent years, after it was found that in some cases it was sold to people who would never have been able to claim on it.

The group said the increase in investment-related payouts was mainly due to a rise in claims against brokers, often relating to collapsed firm Keydata Investment Services.

Overall, 15,000 people received compensation in relation to an investment product.

The FSCS also recovered £1.06bn in relation to payouts made to customers of the collapsed Icelandic banks Heritable Bank and Kaupthing Singer & Friedlander.

The money will be used to reduce the loan the FSCS has from the Treasury to cover the compensation bill for the banking failures during 2008 and 2009.

It will have to begin repaying any outstanding money it owes on the loan from 2012, although a repayment schedule will not be agreed until closer to the time, depending on the market conditions.

The FSCS said it had continued to work with the regulator to enable it to compensate people who lost savings more quickly, and from the beginning of next year, it would be able to make payments to people who lost money through the failure of a deposit taker within seven days.