FSCS Keydata rebate goes to fund managers ahead of IFAs
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The Financial Services Compensation Scheme has announced that any recoveries relating to Keydata compensation will first go to investment fund managers rather than advisers.
The FSCS has decided to refund fund managers ahead of IFAs in order to repay the cross-subsidy triggered by the £326m interim levy, mainly to cover the costs relating to Keydata unit Lifemark, announced in January.
Advisers have had to pay a £93m interim levy towards these costs.
It follows the news that Norwich & Peterborough Building Society is to repay the FSCS for payments the scheme has already made to N&P customers who invested in Keydata products.
N&P has set aside £57m to repay customers who invested in Keydata products through the society, including the payments the FSCS has already made.
The FSCS has also announced that the FSCS annual levy for 2011/12 is lower than previously estimated, as tipped this morning by Money Marketing.
The total levy for 2011/12 has gone down from the indicative £240m levy bill announced in February to £217m.
Investment intermediaries will now face an annual FSCS levy for 2011/12 of £34m compared to the £40m estimated in February, and up from £20.3m the previous year.
But the levy for life and pensions intermediaries has increased from £10.5m to £21.5m, to reflect the reallocation of compensation costs based on updated analysis of claims paid to date.
The FSCS says the life and pensions intermediary levy has risen as it expects claims relating to mortgage endowments and pensions to continue.
Analysis of claims paid to date in 2010/11 shows that a greater proportion of claims came from life and pensions intermediation activities rather than investment intermediaries than in previous years.
FSCS chairman David Hall says: “There is no one right answer to the funding issues raised by Keydata. The costs of failure must be pooled across the industry if the FSCS is to meet its obligations to consumers, and those costs can in turn be redistributed, but not reduced or avoided.
“The FSCS and the FSA recognise however the importance of taking into account the widest range of industry views and settling a future approach to funding which commands the widest possible support.”
Hall adds that the review of the FSCS funding model will take place as soon as European legislation sets out whether the current ’pay as you go’ levy system can continue, or whether a pre-funded model will have to be adopted instead.
The FSA has timetabled the FSCS funding review for Q3/Q4 this year.
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Readers' comments (25)
Pissed Off IFA | 6 Apr 2011 1:01 pm
Is there any hope left for the small IFA? We are just canon folder. It is quite obvious why IFAs are not being sent knives but this sort of thing would make us slit our wrists.
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Chris F | 6 Apr 2011 1:05 pm
I think that large investment houses are far more in need of this rebate than the small to medium businesses of most IFAs.
It makes me feel warm inside that we're looking after the most deserving in the population - the wealthy.
Quis custodiet ipsos custodes?
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Anonymous | 6 Apr 2011 1:07 pm
Ultimately responsibility for advisers and fund managers breaching the rules of the FSA is down to the regulator so if the industry is responsible for the funding of such failing companies/firms then the industry should be responsible also for compliance.
It is a travesty of justice for good honest advisers, who have no control over regulation, to be expected to bail out the public who choose to invest through such rogue companies. Why should the Public not at least share some of the costs also as they must share responsibility through caveate emptor (Let the Buyer Beware)
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Hugh Jeego | 6 Apr 2011 1:09 pm
You couldn`t make it up could you?
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Anonymous | 6 Apr 2011 1:10 pm
Well what do you know? Let's keep a few sweet at the top and let the FSCS pour even more onto the IFA community. To cross subsidise in this way is most probably illegal and the FSCS should be taken to task but they know the IFA community does not have one strong voice whereas the fund managers could easily take action. Once again those legislating our profession and those regulating and sitting in judgement of it get it wrong; the IFA picks up the cost of their mistakes; and the good old IFA is left out in the cold. FSCS if you were physically able I would say hang your heads, but the smell coming from the lining of your own pockets probably prevents it!!
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Anonymous | 6 Apr 2011 1:14 pm
Like the proverbial school bully, they lie awake in bed at night,thinking up yet more ways to make the lives of IFAs a misery.
If they can kick us in the teeth they will.
The whole system is rotten to the core.
No doubt an fscs spokesman will come out and say how this is only fair, blah de blah de blah.
As though we were fairly charged in the first place.
Perhaps they could make a new advert publishing how they rob small business's in order to make everyone else happy.
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Anonymous | 6 Apr 2011 1:21 pm
Predictable responses so far, but how many of you would be criticising this fair policy if the situation was reversed? (please setting aside the specifics of Keydata)
i.e. if another sector had made its maximum contribution and then IFAs had had to cross-subsidise - you'd be the first to want your money back.
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Salt in the wounds | 6 Apr 2011 1:26 pm
So a product provider who turns out to be an intermediary goes bust and all the other intermediaries have to cough up to the FSCS. One intermediary who sold that other ' intermediaries' prducts then pays a whacking compensation refund to the FSCS but this isn't used to rebate the costs paid by the other intermediaries but instead the product providers will benefit although it wasn't they who were hit first of all as the collapsed product provider wasn't a product provider it turned out but was an intermediary.
Makes sense to me!
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Salt in the wounds | 6 Apr 2011 1:28 pm
To Anonymous at 1.21pm.
You are right 'generally' but the whole point is the specifics regarding KeyData!!!!!!!!
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Fraser Brydon | 6 Apr 2011 1:29 pm
At least some money is coming back and that may feed it's way into lower charging by fund managers which in turn leads to cheaper products, ergo more margin for adviser charging. - well you can dream, nothing else left....
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