The Financial Services Compensation Scheme appears to be getting desperate in its legal battle to claw back Keydata costs.
This week we report changes to the criteria for firms to be made lead defendants in the FSCS’s long-running battle to recoup £75m of the £400m paid out in Keydata claims.
Originally, lead defendants were required to have insurance and legal representation and have advised on both Lifemark and SLS-backed Keydata products.
With five of six lead defendants settling already, and the sixth close behind, the FSCS has changed its position. Firms without insurance or legal representation can now be selected as replacements if claims against them are over £150,000.
Lawyers warn these firms may have to shoulder legal costs of £200,000, potentially pushing some out of business and adding further costs to the FSCS.
Experts question whether the court will even allow firms struggling with such costs to become lead defendants.
If this is a new bullying tactic to force smaller firms chosen as the new lead defendants to settle, then it is a regrettable way for the FSCS to be acting.
It may have a duty to chase achievable recoveries on behalf of levypayers who have to stump up considerable sums to fund it.
But with £30m of costs now associated with the legal fight to recover a possible £75m, and huge discounts already offered to firms who have settled, it is hard to see how continuing this battle is acting in their best interests.
If the main motive for continuing this action is to save face, as it appears, then it’s time the action was dropped.
All roads lead to tax relief reform
Pensions tax relief is in the sights of politicians from all the major parties.
In an interview with MM this week, Liberal Democrat pensions minister Steve Webb suggests his party may propose a flat-rate of relief of less than 30 per cent.
Labour is sticking with its horrendously complex plan to restrict relief at the highest tax band to 20 per cent, a policy Webb is right to brand “utter nonsense”. If Labour wants further restrictions under the current regime, then further annual allowance cuts would be much simpler.
The Conservatives are being coy although significant reform may be on their agenda. The Treasury select committee, chaired by senior Conservative backbencher Andrew Tyrie, recently floated the merger of pension and Isa regimes, signalling where the political debate may be moving. Those calling for no more meddling with pensions are likely to be disappointed whoever gains power next May.
Paul McMIllan is group editor at Money Marketing- follow him on twitter here