FCA: New guidance body must boost profile of FSCS

FCA executive director of strategy and competition Chris Woolard

The new single financial guidance body should prioritise informing consumers about the protection the Financial Services Compensation Scheme provides on pensions, the FCA says.

In a roundtable discussion today on pensions and choices for retirement income products, FCA strategy and competition director Christopher Woolard cited research published by the lifeboat fund in March.

The research showed people who are aware of the FSCS are less inclined to buy riskier products and more inclined to opt for those it protects.

Similarly, people who think the FSCS is important are also more likely to take advice and less likely to question the price of that advice.

Because of this, Woolard says the new single financial guidance body, which will be formed through the merger of the Money Advice Service, The Pensions Advisory Service and Pension Wise, should use its powers to raise the awareness of the FSCS among consumers because this will make them better off.

Woolard says: “The new single financial guidance body will have to work out the core messages it wants to convey to consumers. One of them should be the role the FSCS plays in the protection of consumers and how it can help them.

“This is a difficult communication challenge as people who receive advice on pensions are diverse and range from people with savings of between £20,000 and £30,000 at the lower end all the way up to hundreds of thousands at the other.”

Advisers also have a prominent role to play in the education process and helping consumers understand what the FSCS does, he adds.

Woolard says the growth in the size of savers’ pots in Australia had increased the engagement with pensions and a similar effect should happen in the UK from the growth of defined contribution plans.

Also speaking at the roundtable, FSCS chief executive Mark Neale says the lifeboat fund could learn from the Pension Protection Fund, which has a higher media profile.

While this is partially due to the media coverage of defined benefit scheme funding and transfers, the FSCS work is just as important, he adds.

In 2018 it expects to handle 7,000 pensions claims across DB and Sipps and expects to pay £150m in compensation.

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. Couldn’t agree more with Mr Woolard

    Raising the profile of FSCS and highlighting the limited protection available for DB savers taking six figure transfer values should hopefully focus the mind of those willing to give up significant guarantees.

    Comparing and contrasting the PPF protection with that available from FSCS should similarly help DB savers understand the risks they take in leaving their DB scheme.

    As an aside, the industry is fortunate to have people in the FCA like Christopher Woolard who are prepared to come out and meet with us to answer difficult questions in person. If the FCA could engage more with the advice industry (in person), particularly on scams and unregulated investments, it could lead to much greater awareness and better consumer outcomes. Perhaps the new guidance body can be the conduit for this…

    • I agree and that is what many of us have been calling for them to do for decades. We even (when IDDs came in) inserted mention of the FSCS limit for deposit taking, despite not being a deposit taking firm so that we coudl not juste xplain FSCS limits for investments and advice, but also for deposits. Consequently not onlt did we only have one client who had to call on the FSCS when the banking collapse occured, he’d deposited under £5k in a cash ISA with Icesave in the knowledge it was covered by FSCS lmits and would come back in a few montsh time if the higher interest rates they were paying proved (as we thought) to be for a reason.
      Advisers make sure their clients know abotu FSCS, it is the unadvsied who need to know about FSCS and that was the FSA/FCA’s responsisibility and not advisers, especially individual firms.
      When they do start notifying of FSCS, they also need to get the FSCS to STOP paying out where people make investments which are NOt covered by the FSCS even where a regulated adviser is going off piste. Unregulated should mean uncovered for FSCS, especially where SIPPs are involved. They are called SELF invested after all.

  2. Julian Stevens 28th June 2018 at 9:32 am

    It’s a shame (to put it mildly) that the FCA appears to have no plan of action to stem the ever increasing tide of uninsured liabilities being foisted on the rest of us by way of the FSCS. Suggestions:-

    1. Check the GABRIEL returns,

    2. identify which firms are engaged in potentially high risk activities (such as flogging UCIS) or a spike in DPB transfers,

    3. demand proof of adequate PII cover for ALL areas of business,

    4. if a firm cannot provide it or if its Cap Ad is less than twice any policy excesses, impose an instant ban on any further activities in the relevant area/s,

    5. swiftly arrange arrow visits to check a few files,

    6. if those files indicate a general trend of possible unsuitability, order a S166 review and

    6. impose severe sanctions for the submission of false GABRIEL data (such as failing to declare potentially high risk activities).

    Such a process seems so obvious and straightforward that one has to ask why the FCA doesn’t just GTF on and do it instead of wittering on about public awareness of the FSCS and wasting time and money on the FAMR with its hopelessly unrealistic aspiration to reduce the costs of advice. How can the latter ever be achieved in the face of endlessly escalating FSCS levies, much of which is due to incompetence on the part of the FCA and its obdurate refusal to regulate in an appropriately proportionate and targeted manner?

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