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FSCS levy pushed up to £532m by further Sipp failures

The Financial Services Compensation Scheme has named Sipp operators as catalysts for a £16m increase to its levy for the coming year.

The lifeboat fund says the £16m is a relatively small increase on its predicted figures in January, however.

In addition to an uplift in claims against Sipp operators, the FSCS says continuing costs for historic insurance failures also pushed up the price.

A total £74.6m in the £532m was attributed to the FSCS management expenses bill, or what it costs to administer the scheme outside of the cost of actual compensation payments.

The new 12-month levy is higher than the 2018/19 levy of costs of £468m, but that only covered a nine-month period between July 2018 and March this year.

Poll: Should the FSCS compensate for advice on unregulated investments?

Split down as a month-by-month cost, this puts the new levy £42m lower than the last.

Despite this, the lifeboat fund says pension claims resulting from poor advice remain the leading cause of cost increases, as they were in 2018/19.

The FSCS says: “The bulk of these claims will continue to arise from bad advice to transfer retirement savings out of occupational schemes and into Sipps – usually with a view to investment in risky or illiquid assets.”

Outgoing FSCS chief executive Mark Neale says the lifeboat fund will now push ahead with its “promotion and prevention” strategy for the 2020s.

He says: “These trends underline the important of the greater weight which FSCS intends to give in its strategy to both promoting awareness of FSCS protection and to preventing the mis-selling and advice failures which underlie these costs.

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“Promotion and prevention are the counterparts of our continuing and undiminished commitment to be prepared for failures when they occur.

“We shall need the support of all our partners in the industry and the FCA.”

Former Royal Bank of Scotland executive Caroline Rainbird will assume Neale’s position as chief executive early next month.

Speaking at the time of her appointment two weeks ago, Rainbird said: “The strategy for the 2020s represents an exciting opportunity to build on the FSCS’ great work by protecting consumers when they need it and increasing their understanding of the full range of protection available.”

The total levy cost of £532m is now finalised after a consultation period.


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There are 2 comments at the moment, we would love to hear your opinion too.

  1. MM the headline is very misleading, the SIPP itself is not the problem, its the investments held within it and I suspect, by and large they will be “unregulated”

    I would also hazard a guess, that investments into these “unregulated investments” has been done/advised on, by a very small number of firms probably less than 10…..

    You have to be upfront and honest to say these firms don’t transact this scale of business over night, and seeing as we do our RMAR returns twice a year there seems to be a massive show of incompetence from the people at the FCA analysing those RMAR returns ?

    One must presume, that these firms are showing a huge boost in turnover (amongst other warning signs) over a year or two this would this not warrant immediate further scrutiny ?

    There will be I am sure very reasonable explanations for this, and from the RMAR this would be easy to deduce, if there seems to be some inconsistency, then would it be not to hard to ask the FCA to do something about this, instead of letting the train derail and our clients left to pay for the collateral damage !

    • Somebody on another thread posted that he’d asked the FCA and they’d confirmed that nobody analyses the data on either the GABRIEL or RMA Returns. Just what useful purpose they serve is anyone’s guess and the FCA certainly isn’t willing to offer any explanation. Clear, fair and not misleading? Err, hardly.

      I have suggested an auto-flag up system for any data (on the GABRIEL submissions) that suggest trouble, such as loads of cases of Income DrawDown and no annuities, sales of UCIS and such like (probably without relevant PII), a suspiciously high ratio of recommendations to transfer DPB’s vs. not to, etc. but whether anyone at the FCA has taken a scrap of notice is something I guess we’ll never know, unless an announcement is made that its GABRIEL system has been suitably modified.

      As for the FSCS “consultation period”, at the end of which this year’s levy of £532m was finalised, I can’t imagine the response from anyone expecting to be clobbered with a share of this huge sum will have been anything other than to object in the strongest terms possible. So was this “consultation” of any meaningful value or was it, as usual, just a matter of going through the motions? After all, nothing that any respondent will have submitted will have made the slightest difference to the outcome. The FSCS will just have said Well, that’s the hole, the money to fill it has to come from somewhere and there’s nowhere else but the adviser community, so pipe down and pay up or else.

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