The Financial Services Compensation Scheme (FSCS) has revealed it paid out £423m in compensation to customers during 2023/24.

This included £262m for the scheme’s claims service, which includes claims for investments, pensions and financial advice, as well as £160m for customers of failed insurers, and £1m for deposits held with failed credit unions.

The FSCS is the UK’s statutory compensation scheme that protects customers of authorised financial services firms that carry out certain regulated activities. It can pay compensation if an authorised firm is unable to pay back money it owes its customers in connection with a regulated activity.

Publishing its annual report and accounts and class statements, the FSCS outlined the work it had carried out during the past financial year. It revealed that £54m was recovered from failed firms, with approximately £52m used to offset FSCS levies for firms. The remaining £2m was passed on to customers whose losses were above FSCS compensation limits.

In total, the FSCS paid compensation to customers who had experienced losses from 447 different authorised financial services firms, including the 51 that were declared in default during 2023/24.

FSCS interim chief executive, Martyn Beauchamp, said that the FSCS had continued to adapt its service to handle “increasingly complex activity”.

“In 2019, 31% of our claims were what we would class as straight forward, for example for mis-sold payment-protection insurance (PPI),” he said. “That number is now approximately 5%.

“Meanwhile, the proportion of more complex claims, mainly linked to customers’ retirement savings, has increased from around a third to two-thirds.”

Beauchamp added: “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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