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Brokers back FSCS reform over pensions misselling concerns

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Brokers are calling for urgent reform of the FSCS levy as they feel they are unfairly paying to “pick up the bill of miscreants” in the life and pensions sector.

Presently, the FCA and the Financial Ombudsman Service categorise term assurance and critical illness as “non-investment protection policies”. However, the FSCS classifies them as life and pensions business. This means brokers are having to pay for things such as poor pensions advice, even though they do not offer advice in such areas.

Moreover, the FSCS levy trebled from £33m in 2014/15 to £100m in 2015/16, which the compensation scheme says is largely due to a rise in claims for missold Sipps and, therefore, the extra fees will fund the redress for these.

London & Country director Pat Bunton says his firm’s levy totalled more than £250,000 this year, of which 73 per cent related to life and pensions.

He says: “This infuriates me as we don’t hold investment or pensions permissions with the FCA yet we are expected by the FSCS to pick up the bill of miscreants in that area. As if this isn’t bad enough, going forward and with recent pension reforms we worry about what other misselling claims may arise in the future.

“It is patently unfair that a mortgage and GI intermediary should be picking up the bill for life and pensions firms and that we still work within a regulatory framework that allows firms to default and pass their liabilities on to the FSCS, before rising like a phoenix and starting all over again.”

The FCA is set to consult on the FSCS’s funding model next year. Both Bunton and Association of Mortgage Intermediaries chief executive Robert Sinclair propose a “very small” product levy that would go towards funding the compensation scheme.

Sinclair says: “This is all about the fact that there was a lot of misselling where a load of unregulated investments were put into Sipps. The advisers who did that have left the industry and walked away with the money they made and those left are now carrying the can.

“It is especially not fair on mortgage brokers, who are not involved in that side of things.”

He adds: “[The levy] is calculated in a very strange way because it isn’t calculated that way for FCA or FOS fees – it is only for compensation scheme fees.

“We should not be levying on the industry this way; there should be some form of product levy gathered so that consumers pay for this up front across the piece.”

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. Yet, IFAs who have never sold PPI have to pick up the bill for all those failed mortgage adviser companies who did. It works both ways. The good picking up the bill for the bad is unfair on all good companies. However, no-one has come up with a better alternative so far.

  2. But the FSCS says the funding models working well……
    More joined up thinking from one of the F pack with the regulator having one set of categories and the FSCS having another for the same type of business. If it was not so serious, it would be an absolute joke.

  3. Don’t forget that the vast bulk of PPI never fell on FSCS as the banks have been paying it and continue to do so

    • According to the latest published figures, SIPPs accounted for 1,142 claims and £19.4m compensation. PPI (excluding Welcome) accounted for 5644 claims. GI intermediation was £18.7m.

  4. The heart of the problem is poor legislation which has allowed unregulated “advisers” to flog a load of unregulated investments/fraudulent investments to the unsuspecting public. The only simple way to stop it in its tracks is to change the legislation so that financial advice (both pensions & investments) can only be given by suitably qualified & regulated advisers who can only recommend investments that have been approved & regulated by the FCA. If SIPP or other pension providers allow transfers to unregulated investment schemes then they should be liable to compensate mis-sold investors – not advisers who are doing a good job for their clients.

  5. Which ever way you cut it, which ever argument, or counter argument made, it still boils down to the fact, the good, honest and compliant are, paying for the bad, corrupt and feckless !!

    That simply is unacceptable……. full-stop !

    The fact is the FCA and FSCS do not want this to change, they don’t care where the money comes from, who gets levied, whether you sell or advise on this market or not, and most importantly, if its fair or not !

    If they need 1 million or 100 million, they just take it; as its a damn sight easier (and cheaper) than chasing the wrong doers,

    I don’t know which is worse the fact they do this, or the fact we let them do this ? ……….. the later I suspect !

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