The Personal Finance Society has proposed a new style of product levy to fund the Financial Services Compensation Scheme.
As the professional body expresses concerns over the availability of professional indemnity insurance, particularly for defined benefit pension transfers, it says that a ‘savings and investment monetary protection and education levy’ could be taken from total funds under management across UK retail products.
This would be seven basis points or less, the PFS estimates, and would be pooled with advisers’ own contributions to spread risk.
The PFS hopes that while excesses may still apply in some cases, that once the single levy, which could cover both FSCS and other regulatory fees, had built up a fund over time, contributions could reduce in future.
PFS chief executive Keith Richards says: “On the premise that most in the market accept the need to contribute to regulation and protection, our proposal would enable the necessary funding to be achieved without any accusations of bias, unfairness, or punitive prioritisation that makes one sector feel it is carrying the burden for all the others.”
The SIMPEL levy is the latest iteration of calls for a product levy made by the PFS. A product levy could operate in a similar way to insurance premium tax in the general insurance space, where consumers contribute additional sums towards the compensation pot.
In its most recent review of FSCS funding, the FCA was unable to consider a product levy, however, as changes to legislation outside of the FCA’s handbook would require Government input.