FCA rules out product levy in FSCS funding review


A product-based levy has been ruled out as a potential funding model for the Financial Services Compensation Scheme, Money Marketing understands.

The FCA held its first roundtable meeting about the FSCS funding model last week after the Financial Advice Market Review kickstarted a review into the scheme.

The review is expected to consider the fairness of the current funding classes, the scale of impact on firms, and the impact on the scheme from sectors that do not currently contribute at all or enough.

While a product levy was deemed outside the scope of the review, because it would require a change in legislation, it is understood that risk-based and “smoothing mechanism” approaches were raised as two potential solutions.

The FCA is due to launch a public consultation later in the year.

Personal Finance Society chief executive Keith Richards says: “The advice sector has a huge role to play in shaping an improved and fairer funding mechanism, with the consultation allowing everyone to engage constructively bearing in mind that the FSCS was put in place to protect consumers and allow them to engage financial services with greater confidence.”

In April, FCA chairman John Griffith-Jones offered support to ‘polluter-pays’ funding model for the FSCS and revealed the regulator would explore giving firms a ‘no claims bonus’.

Also in April, trade body Apfa backed a product-based levy as well as a lower compensation cap, as a way to bring down the cost to advisers.

The FCA and FSCS declined to comment.