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Aifa rejects product-based levy for FSCS

Aifa deputy director Fay Goddard has dismissed advisers’ calls for a product-based levy to fund the Financial Services Compensation Scheme.

During a debate led by FSCS chief executive Loretta Minghella at Money Marketing Live earlier this month, several advisers argued that consumers should have to pay for the scheme through small additional charges on products.

Minghella argued that the system would be too complicated to administer and customers could end up paying multiple levies. She said this could make advisers reluctant to shift clients between different products, which might otherwise be the best thing to do.

Goddard says a product levy would be unworkable as it would involve risk-profiling products. This would create its own dangers, as seen in the past when certain products were labelled as low risk, only to cause problems further down the line.

She says much of the burden on the FSCS stems from poor advice rather than faulty products.

Goddard says: “Linking the funding of the compensation scheme to individual products does not work. This would involve risk-profiling products across the whole retail financial services sector, which has proved to be dangerous in the past. Look at what happened with low-cost endowments and zeros, both of which were branded low risk. Their risk profile has changed over time.”

DPB Independent Financial Services principal David Barnett says: “If the public wants the protection of the FSCS, then they should pay for it. There should be a flat product levy and the amount of compensation should be divided by the millions of policies sold. This would create a tiny charge on consumers.”


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Gross mortgage lending stood at 25.1bn last month, the highest April lending figure on record, according to the Council of Mortgage Lenders.Lending was 16 per cent higher than in April 2005 and marks six months of record lending figures. But it was 12 per cent lower than the 28.4bn in March, which the CML puts […]

Paymentshield hires new compliance director

Paymentshield has hired Graham Johnston as its new compliance director. He will take responsibility for ensuring Paymentshield meets its regulatory obligations to intermediaries and retail customers including managing complaints and appeals. Johnston joins from Cheltenham & Gloucester, Lloyds TSB’s mortgage provider. The supplier of mortgage-related general insurance products says Johnston is the latest hire to […]


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