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FSCS refunds advisers £50m – then levies extra £36m over Sipp claims

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The Financial Services Compensation Scheme has handed investment advisers a refund of £50m while warning an additional £36m will be levied on advisers and the wider industry to pay for poor Sipp advice.

In a statement published today, the FSCS says the £36m supplementary levy on life and pensions advisers is due to ongoing high numbers of Sipp related claims.

The annual levy on life and pensions advisers for 2016/17 has already been set at £90m. Of the additional £36m, £10m will be billed to life and pensions advisers, taking costs to the annual limit of £100m for that class.

This will trigger a cross-subsidy, with the remaining £26m shared across the industry.

Separately, the FSCS has set its total industry levies for 2017/18 at £378m, compared with £401m in 2016/17.

FSCS chief executive Mark Neale says: “We will ask life and pensions intermediaries to pay their share of an additional £36m to fund compensation for the high numbers of Sipp-related claims we are continuing to receive, but also need to trigger a cross subsidy for the first time.

“These claims relate to advice to switch pension funds into high-risk investments. We previously flagged the potential for high costs here.

“We also need to raise £63m on general insurers to compensate policyholders of the Enterprise and Gable Insurance companies.  And we currently expect a deficit of £15m on our home finance intermediation account due largely to the failure of one particular firm that gave bad advice to engage in risky property investments alongside mortgage advice.”

How the levy breaks down for 2016/17:

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Comments

There are 13 comments at the moment, we would love to hear your opinion too.

  1. Neil F Liversidge 16th January 2017 at 9:10 am

    This just reinforces my point that ‘unregulated’ must MEAN unregulated with no comeback and no compensation regardless of who gave the advice. There also needs to be a criminal penalty for passing off unregulated schemes as being in some way regulated and compensatable. A client recently flew a high-risk microbond scheme past me. It promised high rates of ‘guaranteed’ returns and was marketed with a blurb saying it was “approved by an FCA regulated firm”. No doubt we’ll be paying out on that one in due course.

    • These have been advertised in the nationals for some time, including guaranteed returns from windfarm schemes which had lost their government onshore levy (making the return more or less unviable). Tried to run it past the FCA, I was passed around like a hot potato and kicked into the long grass, so I guess it must be OK to advertise 8% guaranteed rates of return on such schemes as long as someone else pays for the failures!

      • Unfortunately it is totally ok. They are unregulated and if an idiot goes direct to schemes, they are probably orally told they are not covered but if they go via an adviser they will be. So they go off to find someone who will deliver what the clients wants and then screw the adviser if (or more likely when it goes wrong). Either way the company making the offer couldn’t care less as they get the money either way

        • Sorry Marty, I forgot to mention they were advertised by an FCA Regulated firm and as we have seen quite often, some of these firms are winging it, with sales of any old stuff that pays them well and looks good value to a consumer, with little to no real due diligence (maybe they tell people they are unregulated, maybe not, but let’s put that issue beyond debate by stopping the process!).

          As many of us, including Neil and yourself have said, it needs a directive from above to stop the promotion of unregulated products by regulated firms, pure and simple.

  2. Once again, I have to pay for bad selling of SIPP’s. I SELL life cover!!!!!!
    I have never sold a SIPP and never will, so why do I get screwed???

  3. Beyond the sellers of these now failed investments, the FCA is to blame for having FAILED to police and put a stop to such activities on the part of the very firms that it’s supposed to regulate. Most of those now defaulting firms don’t have proper PII cover (the FCA failed to check this) and compensation for the losses of their clients are capped at £50,000.

    I’m amazed that clients who’ll receive no compensation for their losses in excess of £50,000 (and there are probably plenty) still haven’t formed a class action group against the FCA for regulatory negligence. On what grounds could the FCA possibly defend itself against such an accusation?

  4. Why do we have PI ?
    This is why the cost of advice is so high, most of what we charge is flushed down the drain ! via useless insurance that never pays out, exclusions littered in every page, irresponsible regulation, and money wasting leviathans (FCA, FOS & FSCS) who extort an industry to justify its own existence.

    Wasn’t it Sants who proclaimed, there is no reason why the decisions of the FSA should result in higher PI costs or complicate those policy’s,………… what a mumpty and they go and make him a Knight, if the bar is to be set that low, the whole cast of the only way is Essex should get gongs this year !

  5. I’m sure there’s joined up thinking here somewhere but I’m probably not bright enough to see it!

  6. In the FSCS review they want to push for an unlimited claim limit , while only promising to look at PI and other funding issues.

    Can you imagine what the levy will be for unlimited cases.

    We are going to get the worst of this, i doubt the review will produce much other than an Unlimited Claim rule which will break IFA’S AND THE SYSTEM.
    Beware unlimited Claims for Drawdown when the Market drops, FOS has shown a lack of common sense and accountability in its decision making which will result in failed PI claims and Failed IFA firms .
    Can you imagine the well resourced Claim companies gearing up for this..!
    Without fundamental changes to the FOS & FSCS scheme, in terms of scope, funding,decision making and effective Accountability, we are heading for disaster.

    • Heading for disaster? We’re already there. And all the FCA is doing is talking about unworkable propositions such as product levies (which would have to be banded according to perceived risk), trying to impose mandatory policy provisions on insurers (who’ll just say No) or rolling PII into the FSCS. How is the latter going to reduce costs unless the scale of liabilities being taken on is addressed? This entire crisis leads back to regulatory failure ~ but is the FCA prepared for one moment to admit it? Is it hell.

  7. If only some commentators understood the difference between promoting and advising…

    Check out https://www.fca.org.uk/news/news-stories/secured-energy-bonds-plc-%E2%80%93-options-investors for a quick bit of education.

  8. Don’t you mean ‘if only the public knew…’! What matters is the fact that these types of product can and indeed are sold/promoted/advised upon by regulated firms and if ever an advertising campaign about protecting one’s savings was needed (as with the FSCS campaign), this is it! If it upsets the gallery of unregulated products pushers/promoters/sellers/advisers, tough!

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