Double FSCS whammy

10 February 2011 | By Natalie Holt

IFAs already reeling from the Financial Services Compensation Scheme’s interim levy have now been hit with a doubling of the annual levy for investment advisers for 2011/12 to £40m.

The total levy of £240m for 2011/12 compares with a total levy for 2010/11 of £474m, including the recent £93m interim levy on advisers.

The life and pensions intermediation sub-class levy has increased from £9.6m to £10.5m. The levy for the general insurance intermediation sub-class shoots up from £59.6m to £93.5m.

The FSCS predicts claims on payment protection insurance are likely to double from 9,800 to around 20,000 but claims relating on high-profile investment failures to fall from 8,300 to about 2,000.

Chief executive Mark Neale says: “We always welcome a healthy debate about our work and encourage the industry to play a constructive role in the FSA’s consultation on our future funding. At the same time, we have a duty to compensate people with eligible claims. This helps to build consumer confidence and contributes to financial stability.”

But Informed Choice managing director Martin Bamford says: “The £40m annual FSCS levy adds more insult to injury, with news of this coming so soon after invoices for the interim levy. IFA firms do not have unlimited resources to pay these unexpected and unfair bills. The system is doing harm to the profitability and survival of the IFA sector.”

Thameside director Tom Kean says: “It is completely counter-intuitive that the good guys end up paying for the miscreants of the industry. It is going back to the bad old days when we saw gobsmackingly high rates on professional indemnity insurance during the pension review.

“The level of FSCS bills that firms are facing beggars belief. It feels as if we are being attacked from all sides.”

Tenet distribution and dev-elopment director Keith Rich-ards says: “The need for good regulation is evident but the unreasonable and ever increasing cost is simply unsustainable in a sector which continues to contract. This matter needs to be addressed by the Government if it is seriously committed to creating better consumer outcomes and better financial planning and protection.”

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