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FOS limit hike a win for DB transfer claimants, guidance body says

The Single Financial Guidance Body has put its support behind the FCA over the increase in the Financial Ombudsman Service‘s compensation limit, saying it will prove advantageous to consumers thinking about transferring their defined benefit pensions.

The FCA confirmed last week that the FOS redress limit would rise by £200,000 to £350,000 from 1 April, meaning consumers will have access to a higher level of compensation from financial services firms when a complaint is upheld.

SFGB head of pensions guidance services Charlotte Jackson says the added protection of the limit raise is encouraging for people looking to switch out of a DB scheme.

She says: “[The award limit increase] will give added protection and assurance to consumers when using a certified regulated financial, should things go wrong. This will be particularly important for people looking to transfer from a defined benefit scheme.”

TPR urges schemes to monitor high DB transfer activity

The body also warns consumers to check that their financial adviser is registered before proceeding with a transfer, following a difficult 12 months for DB transfer advice.

The SFGB, which replaces the Money Advice Service, Pensions Wise and the Pensions Advisory Service, will be rebranded as the Money and Pensions Service from 6 April.

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  1. Well, maybe, but is it likely to make any difference to the numbers of firms defaulting and their liabilities passing to the rest of us by way of the FSCS? There’ll just be even more defaults. An award of £350,000 that a firm’s PI insurers decline to pay and that the firm itself has no hope of being able to pay is a somewhat meaningless regulatory victory.

    Even if the PI insurer does pay, the amount may well be subject to such a huge excess that just one upheld complaint will break most small to medium sized businesses. Even if it doesn’t, in the wake of a claim, the insurer will almost certainly decline to maintain cover at the next renewal so, should there be another upheld complaint, that will drive the business into default.

    For a small business like mine that engages in nothing high risk, certainly not OPT’s, I don’t expect to see any increases in the costs of my PII but I see no prospect of my FSCS levies doing anything other than continue to rise.

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