Business

Financial compensation payments increase

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Image caption There are various levels of compensation available through the FSCS scheme

Claims for compensation from those who had savings or investments with collapsed financial businesses rose by 25% in 2010-11.

There were 39,500 new claims from consumers to the Financial Services Compensation Scheme (FSCS), its annual report showed.

It paid out £535m, driven partly by the failure of Keydata and as a result of payment protection insurance claims.

Payments are made to cover savers' losses up to set limits.

Full compensation up to £85,000 per saver, per authorised institution is paid to those who deposit money in an authorised bank or building society if it goes bust.

For investment products, the first £50,000 is covered per person, per firm.

Workload

Some 27,000 of the claims made in 2010-11 were the result of the failure of Keydata. The investment firm was closed down by the City watchdog - the Financial Services Authority - in 2009.

The collapse has become the biggest problem yet for the FSCS which has paid out £214m to Keydata investors in the last financial year.

The scheme is expecting a large volume of claims relating to payment protection insurance (PPI) in the coming year, after 20% of new claims in the last financial year were about PPI.

Some sellers of the loan insurance - which in many cases was mis-sold - subsequently went bust, leading to the claims.

The FSCS has a target of paying compensation to depositors when a bank, building society or credit union goes bust within seven days, although the legal requirement is within 20 working days.

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