Calculating compensation

Part

COMP Compensation Sourcebook

Chapter

Calculating compensation

Printed on: 13/12/2024

Rulebook at: 29/03/2009

COMP 12

Calculating compensation

COMP 12.1

Application and Purpose

01/12/2004

Application

COMP 12.1.1

This chapter applies to the FSCS.

01/12/2001

COMP 12.1.2

This chapter is also relevant to claimants, since it sets out how a claim will be quantified. (For the process of paying compensation, including the limits on the amount of compensation that can be paid, see COMP 8 - COMP 11).

01/12/2001

Purpose

COMP 12.1.3

The purpose of this chapter is to set out the different ways in which the FSCS is to calculate compensation.

01/12/2001

COMP 12.2

Quantification: general

01/12/2004

COMP 12.2.1

The amount of compensation payable to the claimant in respect of any type of protected claim is the amount of his overall net claim against the relevant person at the quantification date.

01/12/2001

COMP 12.2.2

COMP 12.2.1 R is, however, subject to the other provisions of COMP, in particular those rules that set limits on the amount of compensation payable for various types of protected claim. The limits are set out in COMP 10.

01/12/2001

COMP 12.2.3

Where a liability of a relevant person to an eligible claimant could fall within more than one type of protected claim (see COMP 5.2.1 R), for example a claim in connection with money held by an MiFID investment firm that is also a credit institution, the FSCS should seek to ensure that the claimant does not receive any further compensation payment from the FSCS in cases where the claimant has already received compensation from the FSCS in respect of that claim.

01/11/2007

Overall net claim

COMP 12.2.4

A claimant's overall net claim is the sum of the protected claims of the same category that he has against a relevant person in default, less the amount of any liability which the relevant person may set off against any of those claims (see COMP 10.2.2 G).

01/12/2001

COMP 12.2.5

For the different categories of protected claim, see COMP 5 and COMP 10.2.3 R.

01/12/2001

COMP 12.2.6

In calculating the claimant's overall net claim, the FSCS may rely, to the extent that it is relevant, on any determination by:

(1) a court of competent jurisdiction;

(2) a trustee in bankruptcy;

(3) a liquidator;

(4) any other recognised insolvency practitioner;

and on the certification of any net sum due which is made in default proceedings of any exchange or clearing house.

01/12/2001

COMP 12.2.7

The FSCS must take into account any payments to the claimant (including amounts recovered by the FSCS on behalf of the claimant) made by the relevant person or the FSCS or any other person, if that payment is connected with the relevant person's liability to the claimant:

(1) in calculating the claimant's overall net claim; and

(2) for a claim for a protected deposit, by reducing the amount of compensation by the FSCSretention sum that the FSCS would have retained if it had made those recoveries itself.

06/11/2008

COMP 12.2.8

The FSCS must calculate the amount of compensation due to the claimant as soon as reasonably possible after it is satisfied that the conditions in COMP 3.2.1 R have been met.

01/12/2003

COMP 12.2.9

In calculating the claimant's overall net claim the FSCS must take into account the amounts paid by, or expected to be paid by, the Society from the Central Fund to meet a member's liabilities under the contract which gives rise to the claim.

01/01/2004

COMP 12.3

Quantification date

01/12/2004

Protected deposits

COMP 12.3.1

For a protected deposit claim, the quantification date is the date the relevant person is determined to be in default, or the date the protected deposit was due and payable, if later.

01/12/2001

Protected contracts of insurance

COMP 12.3.2

For a claim under a protected contract of insurance that is a long-term insurance contract, the FSCS must determine as the quantification date a specific date by reference to which the liability of the relevant person to the eligible claimant is to be determined.

01/12/2001

COMP 12.3.3

For a claim under a protected contract of insurance that is a relevant general insurance contract, the FSCS must determine as the quantification date a specific date by reference to which the liability of the relevant person to the eligible claimant is to be determined.

01/12/2001

COMP 12.3.4

For a claim in respect of the unexpired premiums under a protected contract of insurance that is a relevant general insurance contract (see COMP 5.4.7 R (3)), the quantification date, being the date by which the liability of the relevant person to the eligible claimant is to be determined, is the date the policy was terminated or cancelled.

01/12/2001

Protected investment business

COMP 12.3.5

For a claim made in connection with protected investment business which is not an ICD claim, the FSCS must determine a specific date as the quantification date, and this date may be either on, before or after the date of the determination of default.

01/12/2001

COMP 12.3.6

For a claim made in connection with protected investment business which is an ICD claim, the quantification date is the date the relevant person is determined to be in default.

01/12/2001

Protected home finance mediation

COMP 12.3.7

For a claim made in connection with protected home finance mediation , the FSCS must determine a specific date as the quantification date, and this date may be either on, before or after the date of determination of default.

06/04/2007

Protected non-investment insurance mediation

COMP 12.3.8

For a claim made in connection with protected non-investment insurance mediation, the FSCS must determine a specific date as the quantification date, and this date may be either on, before or after the date of determination of default.

01/12/2001

COMP 12.4

The compensation calculation

01/12/2004

Protected deposit with incoming EEA firm

COMP 12.4.1

If the claimant has a DGD claim against an incoming EEA firm which is a credit institution, the FSCS must take account of the liability of the Home State deposit-guarantee scheme in calculating the compensation payable by the FSCS.

01/12/2001

Protected investment business: general

COMP 12.4.2

The FSCS may pay compensation for any claim made in connection with protected investment business which is not:

(1) a claim for property held; or

(2) a claim arising from transactions which remain uncompleted at the quantification date;

only to the extent that the FSCS considers that the payment of compensation is essential in order to provide the claimant with fair compensation.

01/12/2001

COMP 12.4.3

The FSCS must not pay compensation for any claim in connection with protected investment business to the extent that it relates to or depends on:

(1) a failure of investment performance to match a guarantee given or representation made; or

(2) a contractual obligation to pay or promise to pay which the FSCS considers to have been undertaken without full consideration passing to the relevant person or in anticipation of possible insolvency; or

(3) the mere fluctuation in the value of an investment.

01/12/2001

COMP 12.4.4

If the claimant has an ICD claim against an incoming EEA firm which is an MiFID investment firm (including a credit institution which is an MiFID investment firm ), the FSCS must take account of the liability of the Home State compensation scheme in calculating the compensation payable by the FSCS.

01/11/2007

Protected investment business: claims covered by the pensions review

COMP 12.4.5

If the claimant has a claim in connection with protected investment business relating to the fact that the claimant has:

(1) while eligible or reasonably likely to become eligible to be a member of an occupational pension scheme, instead become a member of a personal pension scheme or entered into a retirement annuity; or

(2) ceased to be a member of, or to pay contributions to, an occupational pension scheme, and has instead become a member of a personal pension scheme or entered into a retirement annuity; or

(3) transferred to a personal pension scheme accrued rights under an occupational pension scheme which is not a defined contribution (money purchase) scheme; or

(4) ceased to be a member of an occupational pension scheme and has instead (by virtue of such a provision as is mentioned in section 591(2)(g) of the Income and Corporation Taxes Act 1988) entered into arrangements for securing relevant benefits by means of an annuity;

the FSCS must take the steps set out in COMP 12.4.6R.

01/12/2001

COMP 12.4.6

If COMP 12.4.5R applies, the FSCS must follow the Specification of Standards and Procedures issued by the FSA in October 1994, as supplemented and modified by subsequent guidance issued by the FSA (in particular, that of November 1996) (the 'Specification') in:

(1) assessing whether a relevant person has complied with the relevant regulatory requirements;

(2) assessing whether non-compliance has caused the claimant loss; and

(3) calculating the amount of compensation due (where the FSCS may rely on calculations made by the FSA or any previous regulator of the relevant person);

unless the FSCS considers that departure from the Specification is essential in order to provide the claimant with fair compensation.

01/12/2001

Protected investment business: FSAVC Review

COMP 12.4.7

Where a claim made in connection with protected investment business relates to an Additional Voluntary Contribution policy advised on or arranged by a relevant person, the FSCS must follow the FSAVC Review Model Guidance issued by the FSA in May 2000 (the "Guidance") in:

(1) assessing whether the relevant person has complied with the relevant regulatory requirements;

(2) assessing whether non-compliance has caused the claimant loss; and

(3) calculating the compensation due (where the FSCS may rely on calculations made by the FSA or any previous regulator of the relevant person);

unless the FSCS considers that departure from the Guidance is essential in order to provide the claimant with fair compensation.

01/12/2001

Protected investment business: excessive benefits

COMP 12.4.8

The FSCS may decide to reduce the compensation that would otherwise be payable for a claim made in connection with protected investment business that is not an ICD claim, if it is satisfied that:

(1) there is evidence of contributory negligence by the claimant; or

(2) payment of the full amount would provide a greater benefit than the claimant might reasonably have expected or than the benefit available on similar investments with other relevant persons; and

it would be inequitable for the FSCS not to take account of (1) or (2).

01/12/2001

Protected contracts of insurance: liabilities subject to compulsory insurance

COMP 12.4.9

The FSCS must pay a sum equal to 100% of any liability of a relevant person who is an insurance undertaking in respect of a liability subject to compulsory insurance to the claimant as soon as reasonably practicable after it has determined the relevant person to be in default.

01/12/2001

Protected contracts of insurance: general insurance

COMP 12.4.10

The FSCS must calculate the liability of a relevant person to the claimant under a relevant general insurance contract in accordance with the terms of the contract, and (subject to any limits in COMP 10.2.3R) pay that amount to the claimant.

01/12/2001

Protected contracts of insurance: long-term insurance

COMP 12.4.11

Unless the FSCS is making arrangements to secure continuity of insurance cover under COMP 3.3.1R to COMP 3.3.2ER, the FSCS must calculate the liability of a relevant person to the claimant under a long-term insurance contract in accordance with the terms of the contract as valued in a liquidation of the relevant person, or (in the absence of such relevant terms) in accordance with such reasonable valuation techniques as the FSCS considers appropriate.

01/12/2003

COMP 12.4.11A

(1) Unless the FSCS is seeking to secure continuity of cover for a relevant person under COMP 3.3.1 R to COMP 3.3.2E R, it must:

(a) pay compensation in accordance with COMP 12.4.11 R for any benefit provided for under a protected long-term insurance contract which has fallen due or would have fallen due under the contract to be paid to any eligible claimant and has not already been paid; and

(b) do as soon as reasonably practicable after the time when the benefit in question fell due or would have fallen due under the contract (but subject to and in accordance with any other terms which apply or would have applied under the contract).

(2) If the FSCS decides to treat the liability of the relevant person under the contract as reduced or (as the case may be) disregarded under COMP 12.4.14 R then, for the purposes of (1), the value of benefits falling due after the date of that decision must be treated as reduced or disregarded to that extent.

(3) Unless it has decided to treat the liability of the relevant person under the contract as reduced or disregarded under COMP 12.4.14 R the FSCS must not treat as a reason for failing to pay, or for delaying the payment of compensation in accordance with (1), the fact that:

(a) it considers that any benefit referred to in (1) is or may be excessive in any respect; or

(b) it has referred the contract in question to an independent actuary under COMP 12.4.13 R; or

(c) it considers that it may at some later date decide to treat the liability of the relevant person under a contract as reduced or (as the case may be) disregarded under COMP 12.4.14 R;

save where the FSCS decides to exclude certain benefits to the extent that they arise out of the exercise of any option under the policy (for this purpose option includes, but is not restricted to, a right to surrender the policy).

01/12/2003

COMP 12.4.12

The FSCS must not treat any bonus provided for under a long-term insurance contract as part of the claimant's claim except to the extent that:

(1) a value has been attributed to it by a court in accordance with the Insurers (Winding Up) Rules 2001 or any equivalent rules or legislative provision in force from time to time; or

(2) the FSCS considers that a court would be likely to attribute a value to the bonus if it were to apply the method set out in those rules.

01/12/2003

COMP 12.4.13

(1) If the FSCS is:

(a) seeking to secure continuity of cover under COMP 3.3.1 R to COMP 3.3.2E R or to calculate the liability owed to an eligible claimant under COMP 12.4.11 R; and

(b) considers that the benefits provided for under a protected long-term insurance contract are or may be excessive in any respect,

it must refer the contract to an actuary who is independent of the eligible claimant and of the relevant person.

(2) In this rule and in COMP 12.4.14 R, a benefit is only "excessive" if, at the time when the relevant person decided to confer or to offer to confer that benefit, no reasonable and prudent insurer in the position of the relevant person would have so decided given the premiums payable and other contractual terms.

01/12/2003

COMP 12.4.14

If the FSCS is satisfied, following the actuary's written recommendation, that any of the benefits provided for under the contract are or may be excessive, it may treat the liability of the relevant person under the contract as reduced or (as the case may be) disregarded for the purpose of any payment made after the date of that decision.

01/12/2003

COMP 12.4.15

The FSCS may rely on the value attributed to the contract by the actuary when calculating the compensation payable to the claimant, or when securing continuity of cover.

01/12/2001

Protected non-investment insurance mediation

COMP 12.4.16

For claims arising in connection with protected contracts of insurance, the FSCS must treat any term in an insurance undertaking's constitution or in its contracts of insurance, limiting the undertaking's liabilities under a long-term insurance contract to the amount of its assets, as limiting the undertaking's liabilities to any claimant to an amount which is not less than the gross assets of the undertaking.

01/12/2001

Protected home finance mediation

COMP 12.4.17

The FSCS may pay compensation for any claim made in connection with protected home finance mediation only to the extent that the FSCS considers that the payment of compensation is essential in order to provide the claimant with fair compensation.

06/04/2007

COMP 12.4.18

The FSCS must not pay compensation for any claim in connection with protected home finance mediation to the extent that it relates or depends on:

(1) a failure of investment performance to match a guarantee given or representation made; or

(2) the mere fluctuation in the value of property

06/04/2007

COMP 12.4.19

The FSCS may decide to reduce the compensation that would otherwise be payable for a claim made in connection with protected home finance mediation if it is satisfied that there is evidence of contributory negligence by the claimant and it would be inequitable for FSCS not to take account of that fact.

06/04/2007

Protected non-investment insurance mediation

COMP 12.4.20

The FSCS may pay compensation for any claim made in connection with protected non-investment insurance mediation only to the extent that the FSCS considers that the payment of compensation is essential in order to provide the claimant with fair compensation.

01/12/2001

COMP 12.4.21

The FSCS may decide to reduce the compensation that would otherwise be payable for a claim made in connection with protected non-investment insurance mediation if it is satisfied that:

(1) there is evidence of contributory negligence by the claimant; or

(2) payment of the full amount would provide a greater benefit than the claimant might reasonably have expected or than the benefit available on similar contracts with other relevant persons; and

it would be inequitable for FSCS not to take account of (1) or (2).

01/12/2001

COMP 12.6

Quantification: trustees, operators of pension schemes, persons winding up pension schemes,personal representatives, agents, and joint claims

06/04/2007

Trustees, operators of pension schemes and persons winding up pension schemes

COMP 12.6.1

If a claimant's claim includes a claim as:

(1) trustee; or

(2) the operator of, or the person carrying on the regulated activity of winding up, a stakeholder pension scheme (which is not an occupational pension scheme) or personal pension scheme,

the FSCS must treat him in respect of that claim as if his claim was the claim of a different person.

06/04/2007

COMP 12.6.2

If a claimant has a claim as a bare trustee or nominee company for one or more beneficiaries, the FSCS must treat the beneficiary or beneficiaries as having the claim, and not the claimant.

01/12/2001

COMP 12.6.2A

If a claimant has a claim as:

(1) the trustee of a small self-administered scheme or an occupational pension scheme of an employer which is not a large company, large partnership or large mutual association or the trustee or operator of, or the person carrying on the regulated activity of winding up, a stakeholder pension scheme (which is not an occupational pension scheme) or personal pension scheme,

(2) for one or more members of a pension scheme (or, where relevant, the beneficiary of any member) whose benefits are money-purchase benefits,

the FSCS must treat the member or members (or, where relevant, the beneficiary of any member) as having the claim, and not the claimant.

06/04/2007

COMP 12.6.3

If any group of persons has a claim as:

(1) trustees; or

(2) operators of, or as persons carrying on the regulated activity of winding up, a stakeholder pension scheme (which is not an occupational pension scheme) or a personal pension scheme,

(or any combination thereof), the FSCS must treat them as a single and continuing person distinct from the persons who may from time to time be the trustees, operators or persons winding up the relevant pension scheme.

06/04/2007

COMP 12.6.4

Where the same person has a claim as:

(1) trustee for different trusts or for different stakeholder pension schemes (which are not occupational pension schemes) or personal pension schemes; or

(2) the operator of, or the person carrying on the regulated activity of winding up, different stakeholder pension schemes (which are not occupational pension schemes) or personal pension schemes,

COMP applies as if the claims relating to each of these trusts or schemes were claims of different persons.

06/04/2007

COMP 12.6.5

Where the claimant is a trustee, and some of the beneficiaries of the trust are persons who would not be eligible claimants if they had a claim themselves, the FSCS must adjust the amount of the overall net claim to eliminate the part of the claim which, in the FSCS's view, is a claim for those beneficiaries.

01/12/2001

COMP 12.6.6

Where any of the provisions of COMP 12.6.1 R to COMP 12.6.5 R apply, the FSCS must try to ensure that any amount paid to:

(1) the trustee; or

(2) the operator of, or the person carrying on the regulated activity of winding up, a stakeholder pension scheme (which is not an occupational pension scheme) or personal pension scheme

is, in each case:

(3) for the benefit of members or beneficiaries who would be eligible claimants if they had a claim themselves; and

(4) no more than the amount of the loss suffered by those members or beneficiaries.

07/10/2008

COMP 12.6.7

Where a person A is entitled (whether as trustee or otherwise) to a deposit made out of a clients' or other similar account containing money to which one or more persons are entitled, the FSCS must treat each of those other persons, and not A, as entitled to the part of the deposit that corresponds to the proportion of the money in the account to which the other person is entitled.

01/12/2001

Personal representative

COMP 12.6.8

Where a person numbers among his claims a claim as the personal representative of another, the FSCS must treat him in respect of that claim as if he were standing in the shoes of that other person.

01/12/2001

Agents

COMP 12.6.9

If a claimant has a claim as agent for one or more principals, the FSCS must treat the principal or principals as having the claim, not the claimant.

01/12/2001

Joint claims

COMP 12.6.10

If two or more persons have a joint beneficial claim, the claim is to be treated as a claim of the partnership if they are carrying on business together in partnership. Otherwise each of those persons is taken to have a claim for his share, and in the absence of satisfactory evidence as to their respective shares, the FSCS must regard each person as entitled to an equal share.

01/12/2001

Foreign law

COMP 12.6.11

In applying COMP to claims arising out of business done with a branch or establishment of the relevant person outside the United Kingdom, the FSCS must interpret references to:

(1) persons entitled as personal representatives, trustees, bare trustees or agents, operators of pension schemes or persons carrying on the regulated activity of winding up pension schemes; or

(2) persons having a joint beneficial claim or carrying on business in partnership,

as references to persons entitled, under the law of the relevant country or territory, in a capacity appearing to the FSCS to correspond as nearly as may be to that capacity.

06/04/2007

Claims arising under COMP 3.2.4 R

COMP 12.6.12

If a firm has a claim under COMP 3.2.4 R, the FSCS must treat each customer of the firm as having the claim for the purposes of calculating compensation within COMP 12.

14/01/2005