Kim North: FSCS needs to work harder to reduce costs


As we enter the quieter summer months, many leave their desks to head to a family holiday while I keep my eyes open for news stories that might want to slip through without attracting too much attention.

I could not believe last week’s news that the Financial Services Compensation Scheme may throw away a scheme to deliver payments electronically. Its intention, initiated in 2011, was to pay out to depositors in failed banks and building societies within seven days by transfer to another bank or building society. The spending on the project to date is a cool £1m.

Why is it so hard for the FSCS to ask the consumer for their sort code and account number and simply transfer the cash? And why spend £1m which mainly comes from funding by the industry to just investigate the feasibility off online payments which may come to nothing?

According to the Payments Council, in 2013, over 30 million UK consumers banked online. People expect to be paid electronically these days to save the trouble of popping into a bank or finding a stamp to pay in a cheque.  

In the 2013/14 annual report the FSCS claims to “strive to minimise our costs”. They have 200 staff employed, £57.7m was spent on management expenses and £243m was paid out as compensation (£25m to Arch cru investors) in 2013/14, reduced from £326m in 2012/13.

There is £16.6bn outstanding on loans, with £446m in interest paid in 2013/14 which accrued from the 2008/09 banking failure.

The FSCS needs to strive even harder to minimise costs to help repay these loans. Electronic payments to a bank of a successful claimant would be a good start. There also needs to be final settlement through the courts of the Keydata case and compensation payments agreed. 

PricewaterhouseCoopers was appointed joint administrator of Keydata on 8 June 2009 so it has been with the lawyers over five years; clients are still out of pocket and the lawyer fees are ratcheting up.

As we look forward, the FSCS is “increasingly concerned” by the rising number of claims received that are related to Sipp investors. 

In my mind, a Sipp is a no-brainer as a good pension wrapper choice for most but it is some of the investments that are problematic. A list of allowable investments in Sipps, such as the old Joint Office Memorandum 101 – which simply listed the permitted Sipp investments on a single page, later replaced by the Registered Pensions Scheme Manual rules, which are complex and runs to dozens and dozens of pages, should be reintroduced.   

In the run-up to April 2015, people needing to decide what amounts of pension fund money they take either as tax-free cash, taxable cash, drawdown or annuity may become a huge issue for the FSCS.

This could be avoided if the rules let those “at retirement” to reverse their decision if advice is provided by, say, an adviser working off a very restricted panel or by someone that will not give advice on the client’s tax position. If not, as the song goes, there may be trouble ahead.       

Kim North ( is managing director at Technology and Technical


David Shelton: TIP OF THE WEEK: Call in the external experts

We have all probably had experience of listening to speakers who failed to cover the topics we were expecting. You do not want this to happen when you invite clients to a seminar. The following checklist should assist your planning: Provide a written brief for the speaker containing all the details, including what you want […]


PI insurer enters adviser market with price pledge

A new professional indemnity insurer has entered the financial adviser market with claims it can halt the trend of escalating premiums. In recent months, advisers have reported increases in PI insurance premiums of between 40 and 50 per cent. Hoyl Underwriting Management says it will offer discounted premiums to firms which can prove they have […]


HMRC rejects nearly 400 schemes in pensions liberation crackdown

HM Revenue & Customs has rejected applications from a total of 362 pension schemes over concerns about pensions liberation.  The figure, published in a recent pensions newsletter from HMRC, represents 8 per cent of 4,530 scheme applications that have been rejected since October 2013. A further 4 per cent of applications are still being reviewed. […]

Trouble ahead - thumbnail

Pensions: trouble ahead?

The pace of change in the pension’s space has been little short of astonishing, and has left thousands of employers struggling to keep their pension policy compliant, and also on the right side of current best practice and governance. Many employers, and indeed many in the pensions industry itself, would like to see a period of no change during the next term of government. This would give all sides a chance to catch up and draw breath. 


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm