The Financial Services Compensation Scheme is stepping in to pay out £100,000 ($164,000) to nearly 400 members of Thanet-based Wantsum Credit Union after it stopped trading earlier this month.

The Financial Services Compensation Scheme is stepping in to pay out £100,000 ($164,000) to nearly 400 members of Thanet-based Wantsum Credit Union after it stopped trading  earlier this month.

The FSCS pledged that an "overwhelming majority of savers" will get their money back within seven days, after Wantsum stopped trading on Monday. Using credit union records, the FSCS will automatically send payments to members of the credit union.

Some 400 savers have just over £100,000 with Wantsum Credit Union. People with up to a thousand pounds will receive a letter to get cash over the counter at their Post Office, while anyone with more than this will receive a cheque.

The FSCS was set up by the UK government in 2001 and is funded by the financial services industry. It has come to the aid of more than 4.5 million people since 2001 while paying out over £26 billion in compensation.

Default

Willow Financial Management, which was forced into administration last year due to £1.5 million in liabilities relating to Arch cru funds, has been named among 20 firms declared in default by the FSCS.

Investment companies the FSCS named included Page & Page Financial Services, Pretium Securities, Silverwind Securities, Berkeley Warburg Financial Planning and Pengwern Wealth Management.

The FSCS said that the default declarations would pave the way for consumers to claim compensation as a result of their dealings with any one of the 20 failed financial firms. The FSCS is the UK's statutory compensation scheme for customers of regulated financial services firms. A declaration of default means the FSCS is satisfied the firm is unable to pay claims for compensation made against it.

“FSCS covers the full range of financial services in the UK. We’re there for consumers when firms go bust. We have already started paying compensation in respect of these firms. However, we are encouraging anyone who has not been contacted by us and believes they may be owed money as a result of their dealings with any one of these firms to get in touch with FSCS," said Mark Oakes, head of communications for FSCS.

Levy

Last month, the FSCS hit investment advisors with a levy of £105 million for 2014/15, up 34 per cent from the levy last year of £78 million for 2013/14.

The FSCS said the increase was in part due to compensation claims triggered by ARM life settlement fund Catalyst. In its proposals for the 2014/15 plan and budget the FSCS said financial services companies would pay £313 million to cover the costs of compensation, up from £311 million in 2013/14.

The Association of Professional Financial Advisors said at the time that it was concerned by the size of the levy, especially when other costs were also increasing.

"We also question whether the activities Catalyst undertook which led to investor losses should be allocated to the investment intermediation class. This is something we’ll be liaising closely with FSCS on over the coming months, as they start to review claims," said Chris Hannant, director general at APFA.

“However, we hope that the long term situation for advisors might not be as bad as this headline number suggests. Under this new approach, the FSCS is more likely to over-levy, removing the need for an interim levy next year and should mean some of the following year’s levy is paid in advance. All of which should, in the long-term, smooth payments," he added.