The Financial Services Compensation Scheme (FSCS) paid out £423m in compensation to customers in 2023/24, its Annual Report and Class Statements have shown.

Of the total compensation, £262m was paid out for FSCS’s claims service, which included claims for investments, pensions and financial advice; £160m paid for customers of failed insurers; and £1m for deposits held with failed credit unions.

During the financial year, FSCS recovered £54m from failed firms, with the vast majority (around £52m) being used to offset FSCS levies for firms, while the remaining £2m was passed on to customers whose losses were above FSCS compensation levels.

The scheme paid compensation to people who has experienced losses from 447 different authorised financial services firms, including 51 that FSCS had declared in default in 2023/24.

Furthermore, FSCS closed out 14 ‘complex firm investigations’, with each averaging 15 months of work.

All but one of these investigations resulted in the decision that compensation may be owed.

The Annual Report and Class Statements also showed that FSCS had a customer satisfaction score of 84 per cent in 2023/24.

“Our focus during 2023/24 was on strengthening our core operation while investing in our future readiness,” said FSCS interim chief executive, Martyn Beauchamp.

“We continued to adapt our service to handle increasingly complex claims activity. In 2019, 31 per cent of our claims were what we would class as straight forward, for example for mis-sold payment-protection insurance (PPI).

“That number is now approximately 5 per cent. Meanwhile, the proportion of more complex claims, mainly linked to customers’ retirement savings, has increased from around a third to two-thirds.

“This has resulted in the amount of evidence we receive per claim increasing by 89 per cent since 2021/22. At the same time, we are dealing with larger and more multi-faceted failures such as SIPP operators that require more time, expertise and resource to investigate.

“In April we opened our in-house contact centre which puts customer conversations at the heart of our office. This is the beginning of a wider strategy to grow our in-house expertise so we can effectively manage the more complex claims that now make up most of our work.

“This shift towards more internal capability will strengthen our control over customers’ experiences while continuing to deliver cost-efficiencies for levy payers. We laid the foundations for this in 2023/24 and continue to make good progress.”

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