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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.



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There are 10 comments at the moment, we would love to hear your opinion too.

  1. Ha ha. The figure will be much higher in practice because people will see it is worthwhile making a claim. Plus, trustees of larger schemes will have a duty to pursue. Just keep racking up the client fees, after all they are the ones who ultimately pay…

  2. And so the cost of regulation and FCA failure gets ever higher. The cost of financial advice increases, more firms throw in the towel and access to advice reduces even more.

    And when no one can get financial advice or access their pensions, or when the significant cost of people dying without life cover or savings starts to make an impact on state benefits, we’ll have another FAMR to see just why this has happened.

    I can’t work out whether the FCA is deliberately trying to destroy us or whether they are genuinely very stupid and incompetent. It doesn’t really matter as the end result will be the same.

  3. and off we go again… Unless we can escape this madness the FSCS which has expanded at 40% compound over the last 5 years will take out the sector.

    Don’t ignore this go to

  4. Trevor Harrington 30th November 2015 at 7:57 pm

    20 years ago, I advocated that the businesses who incur the complaints should pay both the regulatory fees and the FSCS levy in direct proportion to the numbers of complaints they receive in the preceding year. The article was called ” the good the bad and the ugly”, and was published in both the weekly pinks.

    It is very simple really …. if you do … you pay.

    A very effective form of self regulation and, more to the point, it was easily proportioned between the bad guys, as we all submit complaints data to our glorious regulator.

    Had this simple piece of proportionate regulatory cost and payment system been adopted, we would not have had anything like the historical miss-selling issues which we still suffer from today. Neither would we have a regulator of such a huge size and waste of our funds, which we have arrived at today.

    As has always been the case, that simple and effective, and totally practical, forms of regulation, put forward by those “who know” at the coal face …. is totally ignored by the regulator. Why? …. because the regulator is above these simple and practical management techniques, and prefers to propagate their own ever increasingly complex, and very expensive, existence.

    Well …. here we are again.

    Incidentally Garry, your attempt at elitism will fail.
    The reason why I can be so sure of that is because it has always failed in the past (there have been several attempts), and the regulator actually does really want you to succeed in creating such a body, specifically so that they can “divide and conquer”, as they have always done in the past.
    Furthermore, your elitist group looks good on their reports, proving that they are doing something when they are not. When you have helped them eliminate the little guys, which your elitist idea will certainly do, who do you think will be paying their regulatory fees and FSCS levies then?

    Answers on the back of fag packet please …. it is not a complicated calculation.

  5. There is without doubt a ‘desperate’ need for a review of processes (not through the FAMR as that is a wider matter). The amount of rubbish which is being allowed to slip through the system beggars belief and appears to be growing by the week, what the hell is going on?

    Having reported one ‘investment’ which was being peddled by a UK regulated firm to offshore clients a couple of weeks ago (no response expected or received), it is clear that there is a deepening blackhole which needs addressing immediately and in a sledgehammer way. STOP the sale of unregulated products by the regulated firms. Make it clear (FSCS advertising campaign or whatever!) that if the product doesn’t carry the logo (make one!) it isn’t covered. Caveat emptor.

    If firms want to sex up their product offering to clients (complex tax schemes to footballers and celebrities who clearly do not understand them anyway, which in itself is clearly at odds with TCF), then let them set up on an unregulated basis and become accountable to normal legal process; not form a part of a scheme which bails them out and which we and our clients pay ludicrous sums of money, by compulsion, to support. I would like to think that as a funder of any scheme, I would have a right to either a say or an opt-out, but not the FSCS and that clearly isn’t right.

  6. Well I have just moved, in a cost cutting exercise to reduce my costs by a 3rd, to counteract the increase in costs that WILL happen over the next 5 years, i estimate these will be in excess of 40%, assuming the status quo stays the same.

    We continue to hear the FCA and FSCS are looking at the funding and for themselves and the levies, however they seem unwilling to alter their practices to accommodate any fairness, or indeed any savings ! (product levy for one)

    Include the new CA requirements, and you slowly start to build a picture of how stupid and expensive this really is, and this will snowball over the next 5 years and beyond.

    If i can put this in context, think Dunkirk ! we are being driven back by a unyielding army of bureaucracy, and cost, with our backs to the sea ! And I fear a flotilla will not be there to aid our retreat and some (maybe a lot) will drown.

    The FCA (as its always been) is a brat of a child, that should have been drown at birth.

  7. I have just received a text ” Do you have a frozen pension of over £15000, want over 50% in cash from it now. Under 55 years old no problem visit www. pension-unlock. com now surely this is the type of company they should be focused on, the companies that peddle this sort of sale should be the ones who pay!

  8. Re Steve D Totally agree, you speak straight forward common sense.

  9. And with more and more Claims Management Companies encouraging everyone and anyone to ‘claim compensation’ for any Pensions, Investments ISAs etc., and using the FOS as a ‘free clearing house’, at no cost to themselves, advisers will be unable to defend themselves properly and will quickly buckle under the presure, therby falling on the FSCS even more!

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