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PFS renews calls for product levy to fund FSCS

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.

Kim North: FCA’s reasons for dropping FSCS product levy are weak

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.

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. Nicholas Pleasure 10th May 2018 at 10:14 am

    It’s a good idea and it would work; with one proviso.

    The FCA still needs to sort out the issue of clients in regulated products paying for the unregulated.

    Other than that, clients are paying for all of this stuff already. In the interests of transparency, the cost of regulation should be clear, not hidden within advice fees and product charges.

    • Agreed, unless it’s accepted that the regulated will pay for the unregulated then it simply doesn’t work. And it doesn’t solve the problem, or alleviate the suffering, of the consumers caught up in it either.

      What’s needed are rules that prevent unregulated products ending up in the hands of retail clients via regulated firms. Restrict these products to professional and counter-party clients only, simple.

  2. Been asking for this since 2004.

  3. Hang on I thought one of the principles behind RDR was to break the link between product providers and advice One of the examples quoted in the article was the concern appears to be the availability of PI cover for DB transfer
    The question should be why If an adviser wants to advice in this market he has to take responsibility of the their own PI cover he is giving the advice not the product provider should be ask to contribute to his commercial activities
    You cannot have both ways.
    either advisers stand on there own or we go back to the old system
    I suppose this what you get when a professional body starts to play politics
    what they should be concentrating on is working with agreeing a sensible framework with the regulators that will give both the public and the PI market confidence in advice given That is the way the PI instance market will offer cover at commercial rates acceptable to the adviser market

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