Hargreaves Lansdown attacks compensation levy as profits rise 41%

Fund manager Hargreaves Lansdown has seen its half-year profit growth held back by an industry-wide compensation fund levy that forces firms to pay for the "incompetence of others".

The group yesterday reported a 41 per cent rise in half-year profits to 56.3 million, but said this would have been significantly higher had it not been for a 3m bill for the Financial Services Compensation Scheme (FSCS) levy.

It called for a review of the scheme, which compensates savers and investors in the event of a UK authorised firm going bust.

Recent rises in the levy have drawn industry-wide anger over how the system works.

Ian Gorham, chief executive of Hargreaves Lansdown, said: "Shareholders in reputable firms should not have to foot the bill for the incompetence of others and we believe that the way in which such a compensation scheme is funded and operates needs to be reviewed."

The FSCS blow did not hold Hargreaves back from achieving record profits and revenues in the six months to 31 December as increases in world stock markets boosted investment business and funds under management.

It said the first-half performance was particularly pleasing, as its final six months are traditionally much stronger thanks to a boost from the tax year end.

Funds under management rose by 27 per cent to 22.3 billion as at the end of December.

During this time, an equity bounce back saw London's FTSE All Share Index surge by a fifth.

The firm is hoping to benefit over the next six months from increases to individual savings account (ISA) allowances and pension changes.

Analysts at Numis Securities increased their forecast for annual underlying pre-tax profits after the interims, from 129m to 133m - which would be a 47 per cent hike.

Increasingly popular self-invested personal pensions will be a lucrative area for Hargreaves, as will ISAs thanks to the allowance increase, they added in a note.