The Financial Services Compensation Scheme (FSCS) has reduced its annual levy on the industry for 2024/25 to £265m.

In November the compensation body had warned that the levy could be as high as £415m.

The figure represents a small decrease from the final 2023/24 levy of £270m.

The FSCS said that while it expects to pay £363m in compensation during 2024/25, it had been able to reduce the levy in part due to recovering over £54m from the estates of failed firms and other parties during 2023/34.

The FSCS added that the reduced average compensation values on pension transfer claims, as well as expecting to receive fewer new claims, played a role in the levy reduction.

Wealth management and Financial Planning trade association PIMFA welcomed the reduction in the levy.

Simon Harrington, head of public affairs at PIMFA, said the reduction would come as a welcome relief for firms and reduce their outgoings for the coming year, allowing them to focus investment internally rather than on servicing the cost of regulation.

He said: “We are particularly pleased to see that the FSCS has managed to recover a significant amount from failed firms over the reporting period and this is something which we would like to congratulate the FSCS on.

“We have always been clear that more focus should be placed on recovery in pursuit of reducing the levy and while we accept that recoveries are difficult and even harder to plan for, this represents significant progress on behalf of the FSCS and the levy more generally.”

In January the FSCS said it will increase its workforce by about 25% by 2024/25 to cope with a surge in complex cases.

The FSCS headcount will rise from 254 to 321 with the recruitment of 67 new staff.

The consumer safety-net plans to fund the increase by bringing a large chunk of work back in-house as its moves to a ‘new operating model’ with more senior expert case handlers.

The FSCS said that while there was no confirmed date for the recruitment, the additional costs were planned for in the 2024/25 budget.

The next FSCS levy outlook will be published in the autumn.