Compensation scheme pays out £1bn

Last Modified: 25 Jul 2008
Source: PA News

More than £1 billion of compensation has been paid out to consumers who lost money due to a financial services firm going bust during the past seven years, a report shows.

The Financial Services Compensation Scheme (FSCS) said it had paid out £1.04 billion to people who were left out of pocket as a result of a bank, insurer or other firm going under since it was set up in 2001.

But despite passing the £1 billion milestone during the year 2007/08, the group said there was actually a 33% drop in the number of claims it received during the period, with only 16,490 new claims coming in.

Claims relating to mortgage endowments continued to dominate the FSCS's in tray, with people typically claiming because the firm they bought the product from had failed before it had paid them redress for a mis-selling claim.

Overall, the FSCS received 7,410 claims relating to mortgage endowments during the year - accounting for nearly half of all claims that came in.

It reviewed a total of 13,625 mortgage endowment claims during the 12 months, with people offered compensation in 45% of cases, receiving an average of £1,800 each.

The second largest area of claims related to split capital investment trusts, complex investments in which consumers lost millions of pounds when the sector ran into problems due to high levels of debt and cross-holdings in other splits.

The FSCS said it received 4,705 claims relating to splits during the year and completed 3,470 cases, although only 16% of those who complained qualified for redress, receiving around £5,500 each.

Claims relating to pensions fell by 43% during the year to just 390, but those involving credit unions soared by 160% to 2,680, although the group said the number of credit unions that failed remained low.

It added that 98% of people who lodged a claim relating to one of the community saving and borrowing schemes received compensation, getting around £480 each.

These news feeds are provided by an independent third party and Channel 4 is not responsible or liable to you for the same.