View more on these topics

PRA to raise annuity FSCS compensation limit

The Prudential Regulation Authority has set out plans to raise the FSCS compensation limit for annuities to 100 per cent of the fund.

Under current rules, people who buy long-term insurance products – including annuities, pensions and life assurance – receive FSCS protection up to 90 per cent of the value of the fund, with no upper limit.

The PRA says the proposal to increase the limit “reflects the potential for significant adverse consequences to policyholders, and the wider financial system, of cover being disrupted”.

The limits for all other types of insurance will remain the same.

PRA chief executive Andrew Bailey says: “The increase in FSCS limits for certain types of insurance will mean policyholders who may find it difficult to obtain alternative cover, or who are locked into a product, have greater protection if their insurer fails.”

The PRA also considered, and rejected, setting a cap of £1.25m on long-term insurance claims, in line with the pensions lifetime allowance. 

EY senior adviser Malcolm Kerr says: “The proposal to increase the annuity compensation limit to 100 per cent makes sense given that these contracts could remain in force for 30 years or more and cannot be surrendered.

“The paper shows that the Bank of England recognises there will be innovation in the annuity market and have factored this into their thinking.”

The PRA says the new rules will take effect in July next year.

The news comes after consumer bodies warned retirees who take their pension as a cash lump sum from April next year, when new flexibilities announced in this year’s Budget come into force, may be unaware of the financial compensation protections they are losing.

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There is one comment at the moment, we would love to hear your opinion too.

  1. And who will fund this?

Leave a comment

Close

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

Email: customerservices@moneymarketing.com