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FSCS awarded £326m in compensation during 2012-13

FSCS awarded £326m in compensation during 2012-13
The Financial Services Compensation Scheme (FSCS) paid £326 million in compensation during the 2012-13 financial year.

Its Annual Report and Accounts 2012-13 document details the breakdown of the compensation given to consumers - it received 62,030 new claims during the 12-month period. The organisation is seeking to streamline its process and the figure represents a 36 per cent year-on-year reduction.

Despite the fact the number of cases has fallen, the complexity of the disputes has increased and this is connected to firm failures in the investment sector and ongoing issues with payment protection insurance mis-selling.

As part of the move to streamline the service, claimants can now submit their claims on the internet - this is designed to offer customers better information.

Mark Neale, FSCS chief executive, said the scheme has been "a force for financial stability", as it plays "a vital role in protecting consumers when authorised firms go bust". He added the protection offered by the FSCS helps to foster consumer confidence.

"[It] contributes to a stable and thriving financial services industry. Research shows that the more aware people are of FSCS, the more confident they are. That is why we work hard to compensate people with valid claims," he added.

The expert stated steps forward have been taken over the past 12 months in terms of promoting the FSCS and the service it offers, but there is still plenty of work to be done in this area to safeguard the right of people launching compensation claims.

When asked about the FSCS' approach to cost cutting, director general of the Association of Professional Financial Advisers Chris Hannant said he supports the measure in principle. However, he cautioned that some of the calculations being used by the body could lead to distorted results.

For example, the way exceptional factors are being adjusted by the FSCS is worrying, as he feels some events will incorrectly be put into a lower category.