The Financial Services Compensation Scheme is funded from:

The Financial Services Compensation Scheme (FSCS) is funded primarily through a levy imposed on authorized firms within the financial services sector. This means that the costs of the scheme are distributed across these financial institutions, ensuring that they contribute to the safety net that protects consumers in the event of a firm failing.

The reason for this funding mechanism is to create a pool of resources that can be quickly accessed to compensate consumers who have lost money due to the insolvency of a regulated financial service provider. By levying authorized firms, the FSCS ensures that those who are benefiting from regulatory oversight and consumer trust contribute to the system designed to uphold financial stability and consumer protection.

Other funding options, such as reliance on general taxation, would not create a direct link between the financial services industry and compensation for its consumers. Similarly, a percentage levy on investment and pension funds or proceeds from Insurance Premium Tax would not serve to directly fund the FSCS, as these mechanisms do not target financial service providers specifically in the manner needed to create an effective compensation scheme.