Advisers face higher FSCS bills as regulator eyes pension expansion


Changes to the scope of the Financial Services Compensation Scheme could see claims rise by between £640,000 and £5m a year, the FCA estimates.

In a consultation paper published today, the regulator proposes expanding the eligibility of the FSCS to include trustees of occupational money purchase pension schemes of any size.

Trustees can make a claim if there are losses resulting from the failure of an FCA-authorised firm.

But currently, trustees of schemes with large employers – defined as having turnover more than £6.5m, a balance sheet over £3.26m and more than 50 employees – cannot make claims.

However, the FCA says “it is not clear the size of the employer is relevant in the case of money purchase benefits, since the employer is not guaranteeing anything”.

The regulator also proposes removing trustees of SSAS’ right to claim if the employer is large.

As a result of the changes, the FSCS levy is expected to rise to between £640,000 and £5m a year.

The estimate is based on similar past claims and data from The Pensions Regulator. The lower figure uses assets as a measure, while the higher estimate is based on the number of scheme members.

The FCA says: “Extending eligibility to claim on the FSCS to trustees of money purchase occupational pension schemes with large employers will lead to an increase in the cost of compensation, and related management expenses, paid by the FSCS.

“This will be met by firms – in particular, firms in the investment intermediation funding class at the time of a relevant FSCS levy.”

Life and pensions advisers will also pay towards the increased cost.

Last week, Money Marketing revealed the FSCS is to explore alternative funding models to give advisers more certainty over levies and address claims the ‘pay-as-you-go’ model is unfair.