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FSA rejects calls to raise maximum redress limits

The FSA has resisted calls to increase the maximum compensation that the FOS and FSCS can award customers.

In its latest regular review of the compensation and eligibility limits for both schemes, the FSA rejected calls from consumer groups to increase the maximum limit for ombudsman awards from 100,000 to 200,000.

Some in the industry say that the 100,000 cap, which was introduced in 1981, is outdated while others say an inc-rease would cause profess- ional indemnity insurance rates to soar for advisers.

The FSA review shows that most claims or complaints are still well below the curr- ent maximum limits. It says that the current FSCS limits exceed minimum EU limits for deposit-based products and investments.

Aifa welcomes the news but says the FSCS limits for insurance claims, which will remain unlimited, should be capped.

Deputy director general Fay Goddard says: “There is no justification to change the limits but liabilities should be capped on the general insurance side. Increasing the limits would cause professional costs to rise.”

The U-turn on residential prop- erty in Sipps grabbed the head-lines but two other anti-avoidance provisions announced in the pre-Budget report are also worth a mention. They are:1: The closing of the purchased (or secondhand) excluded property scheme for moving assets outside the (inheritance) taxable estate of a UK-domiciled person while still enabling them to retain access.2: The application of the pre-owned asset tax to the revert-to-settlor scheme used to enable a UK-domiciled property owner to transfer property, continue to occupy it and avoid IHT on death (after seven years).

The excluded property trust closure took effect from midnight on December 5 but, surprisingly, those who had purchased their interest before that time can continue to enjoy the benefit without the penalty. The application of Poat to the revert-to-settlor scheme also took effect on December 5 but will apply to all schemes when- ever established.

The combination of the “Sipp residential property bombshell” and these two other changes mean that there are now even fewer ways for a person owning residential property to reduce inheritance tax.

Planning during lifetime is virtually (if not completely) impossible if a person wants to carry on living in a principal private residence without paying a full market rent or sharing occupation with the donee(s) of a gift of a scheme in the property.

Planning to maximise the use of the nil-rate band of a joint owner on the first of a couple to die could be possible through the use of a discretionary trust or the pecuniary legacy/charge scheme.

However, it is believed to be good practice to ensure that the trust used in either structure is registered as a trust and run as a proper trust with trustee meetings and clearly documen- ted decisions.

Paying a full market rent on the part gift or the joint occupation route may be more feasible for second properties – the sort that may otherwise have been considered as Sipp transfer fodder.

For buy to lets, then, the key determinant in lifetime planning will be whether the potential donor can afford to give up the rent.


Clash of the giants over outsourcing

The New Year ushers in a clash of the titans scenario with outsourcing giants Vertex and Capita going head to head in a fight to deliver administration, outsourcing and elect- ronic services to advisers. The main battleground for the portals will be in delivering multi-tie technology platforms. This was already in evidence towards the end […]

Confusion surrounds Sipp protected rights

The Department for Work & Pensions has declared that Sipps are mainstream schemes and can hold protected rights. But deespite lengthy lobbying for the change, the industry has criticised the DWP for failing to provide clarity on how this will work in practice. There is confusion surrounding whether protected rights pots can be held within […]

Pearl pension admin is outsourced

Pearl Group Staff Pension Scheme trustees have outsourced admin to First Actuarial. The 25,000-member scheme is administered by an in-house team in Peterborough and these staff will join First Actuarial.


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