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FSCS ups fees by £24m over Sipp claims

Mark-Neale-at-office-in-2014-700.jpgThe FSCS has announced it will raise an additional £24m in the 2017/2018 year due to an increase in Sipp-related claims.

While the six-month average cost of each Sipp-related claim has reduced from £30,000 to £23,000 over the last year, the number of claims has risen 4 per cent.

There was also an increase in the overall uphold rate from 61 per cent to 66 per cent.

FSCS chief executive Mark Neale wrote in an industry outlook published this week that the cost will trigger a cross-subsidy and fall on the funding pools that include retail financial advisers.

He said: “[In April] I cautioned that we did not have 20/20 vision and that our levies for the year ahead were only ‘final’ in the sense that they represented the best assessment we could make on the information then available,” Neale said.

The FSCS forecast in April that Sipp-related costs would amount to around £146m, but chose to raise a levy of only £100m – the maximum for the sector.

“We levied to the amount of the limit rather than triggering the retail pool, because of the uncertainty around the number of claims and their value,” the FSCS outlook says.

The lower than expected compensation payments meant the compensation forecast was now £15m below the original forecast, but the additional levy still had to be raised.



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There are 3 comments at the moment, we would love to hear your opinion too.

  1. I was astonished to hear at a recent MM conference that 80% of claims paid by FSCS were related to unregulated products. Although SIPPS are regulated, the adviser investment strategy included underlying investments in unregulated products. I appreciate the constraints of collective investments and why an adviser might want to recommend investments in more esoteric areas or direct investments in equities or investment trusts.
    In my view, underlying investments in unregulated products should only be recommended to sophisticated investors and also come with higher risk warnings where the client accepts that if the investment goes wrong and they loose their money, they will be unable to make a claim. It would be the advisers responsibility to make sure this is made clear to the client before proceeding with the unregulated investment recommendation. Would this reduce these type’s of claims?

    • The regulator will never allow any regulated firm to transact/arrange any type of business with an exemption from liability in the form of a waiver signed by the client.

      As already seen, a number of complaints about Exec. Only and Insistent Client transactions which have been rejected but then referred to the FOS have been upheld on the basis that if the firm knew a particular course of action (probably) to be contrary to the best interests of the client, they shouldn’t have facilitated it.

      The reasons for such vast volumes of uninsured liabilities being taken on by the FSCS are firstly that the FCA has failed to identify, home in on and put a stop to firms mis-selling junk UCIS and secondly that it [the FCA] has, in the form of Andrew Bailey, stated that it’s not even bothered about firms not having relevant PII cover in respect of all their activities.

      As a result, it’s hardly surprising that our FSCS levies continue to go up and ever up. If ever there were two examples of the FCA not being fit for purpose, these must surely qualify.

  2. They should run the railways

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