View more on these topics

Europe moves step closer to pre-funded compensation schemes

The European Parliament has moved a step closer to requiring investor compensation schemes to be pre-funded across Europe.

The economic and monetary affairs committee has published draft text to amend the investor compensation scheme directive, which will be used as the foundation to bring all European compensation schemes under common rules. It will cover investment claims relating to fraud, negligence, systems and controls and poor investment advice.

The committee calls for the minimum guaranteed level of compensation to go from €50,000 to €100,000 and says schemes should be pre-funded within five years rather than the 10 years originally suggested. At present, UK investors are protected up to £50,000 for investments.

Investment firms would be required to contribute 0.3 per cent of their assets towards the scheme and to set out the cost of the scheme to each investor.

Aifa policy director Andrew Strange says: “Originally, Europe was talking about 0.5 per cent of assets to fund schemes. Based on Investment Management Association statistics and the level of retail funds in the UK, that equates to a pre-funded compensation scheme of around £4bn.”

An FSCS spokesman says: “We are watching these developments with interest. There is still a significant level of debate to be had around the issues involved, including the pre-funding issue.”

The European Parliament will vote on the draft text in July. Delegates from member states will then debate the text to reach a common agreement. Changes to investor protection follow the increase to the deposit compensation limit from £50,000 to £85,000 in December, the equivalent of the €100,000 limit in European member states.

A separate directive is also going through the European Parliament looking at changes to compensation relating to life and pension business.

The FSA is awaiting developments in Europe before pushing ahead with its review of the Financial Services Compensation Scheme later this year.


News and expert analysis straight to your inbox

Sign up


There is one comment at the moment, we would love to hear your opinion too.

  1. The FSA is becoming ever more impotent as the EU tells them what to do.
    Usually I am totally against EU directives, but when it comes to the FSA I love it!

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm