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‘We don’t have 20/20 vision’: FSCS chief on £20m interim levy

The Financial Services Compensation Scheme “does not have 20/20 vision”, says chief executive Mark Neale as he justifies a £20m interim levy for advisers for Sipp misselling claims.

Today the FSCS announced life and pensions intermediaries will be hit with the interim levy, which it said was down to an increase in claims relating to advice to transfer pensions into Sipps.

Last month, the FSCS said it will start paying compensation for losses in the value of investments held in Sipps, as part of claims about advice to transfer into Sipps, which advisers branded unfair.

In a blog on the FSCS’s website today, Neale says the cost of compensating claimants for the loss of their investments is the primary driver of the £20m levy.

He says: “I fully recognise that demands for money outside the annual levy cycle are never easy for firms.

“We do not have 20/20 vision. We do not always have sight of firm failures in the year ahead when we set the levy.

“We cannot always predict the volume and size of claims arising from failures we do know about. And there can always be new legal or regulatory developments with implications for FSCS’ judgement about the eligibility of claims and the quantification of losses.”

Neale says the volume of Sipp claims carries “cautionary lessons” for the Government’s pension reforms being introduced in April.

He says: “The people we are compensating now were not reckless or happy-go-lucky. They simply wanted to make modest retirement savings go further and got very bad advice about how to achieve that.

“There will be many more people from April who also want to maximise the income generated by their retirement savings. It is critically important that these people receive guidance not only about the options open to them, but also about FSCS protection of the different products they might choose.

“That is why FSCS is working closely with the providers of the Pension Wise service to ensure people understand FSCS protection.”

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Comments

There are 11 comments at the moment, we would love to hear your opinion too.

  1. Was it the advice to transfer or the investment within the SIPPs that is the cause for complaint?

  2. Can we confirm that these were regulated investments that we are due to be paying for please?

    If so, I think we need to know why the failed and what the FCA was doing when they failed.

    If these investments are unregulated, I would like to know why they are allowed in a SIPP.

    it’s time there was a separate FSCS category for IFA’s that recommend regulated investments only.

    It is not right that we pay a fortune for regulation and then a fortune again when regulation fails but we never get any answers or see any accountability from those that are in charge.

  3. The scanario referred to is a salutory lesson. If a client is keen to make a particular investment based on his own research, advice cannot be limited to which SIPP provider is the best / cheapest means of facilitating that. Notwithstanding the client may have signed declarations/confirmations etc etc in whatever liquid is held sacred, the adviser remains responsible for the whole shooting match.

    Fast forward that to pensions flexibility, all those mis-guided folk who just want to spend the bunga now and are quite prepared to say its their decision to do so, will of course have no future recourse having signed their instructions accordingly. Not if the roof falls off their house in ten years time and they can’t repair it, not if they can’t then qualify for state benefits, not if annuity rates rise dramatically and suddenly look attractive, not if, not if, not if…..

    Well, that’s my pig fully fuelled and waiting for clearance then…….

  4. “We do not have 20/20 vision.”

    Is it just me thinking that’s exactly what the regulators sometimes expect advisers to have?

  5. Instead of billing advisers millions the various regulatory shambles need to sort this mess out once and for all:

    The FCA regulates all products full stop
    Non regulated products illegal for retail investors
    If an adviser helps a client that wants a certain outcome – irrespective of clearly disclosed consequences – the adviser involved can NEVER be liable.

    More flying pigs..

  6. The FCA regularly accords itself the luxury of making judgements based on 20/20 hindsight vision ~ they call it thematic reviewing.

  7. I thought that the annual levy we pay for the advisory FSCS sub-class was hiked up precisely so that we could avoid these interim payments. Another bit of regulatory failure to add to an already disgraceful list.

    If Mark is right and these “victims” received “very bad advice” then he should name the firms and controllers of those firms and the FCA should explain why, if it is the case, that those individuals are still authorised and regulated

  8. This is so simple, stop paying out on non regulated investments. I don’t care if they have been recommended by regulated advisers, stop paying out on regulated products. I don’t care and neither do my clients, what we do care about is paying out time after time for the same reasons, you don’t need 20/20 its happened so many time in the past.

  9. Well; Mr Neale, I personally find your comment (20 20 vision) extremely patronising !

    You have the luxury of not having to look past the end of your nose, and collect you £200 every time you wiz past GO !

    You and Martin Wheatley keep letting George Osborne walk away with your dinner money (1.3 billion to be exact) which is meant to compensate those due money via the FSCS ( basically the bad compensating the good) !! and for you to come out and state “its never easy for firms” is frankly ……. my initial reaction is un printable !! and I don’t really care if you sleep well at night or not, I just wish you eyes didn’t open in the morning !

  10. A fair and simple solution would be an FSCS protection levy built into the price of every product at point of sale. Investors into any product without such a levy would be afforded no protection. The present system is a bit like all car dealerships, regardless of the cars they sell, in what quantity and to what types of driver, being required to pay an open ended levy to a central insurance fund. Were such a system proposed, it would, quite rightly, be met with outrage, yet is this not pretty much exactly what FS intermediaries are saddled with, under threat of confiscation of our livelihoods if we don’t cough up year after year?

    The obstacles to such a solution are, of course, fairness and simplicity.

  11. http://www.moneymarketing.co.uk/news-and-analysis/regulation/fca-bans-two-advisers-over-sipp-suitability-failures/2009354.article

    Pair of Advisers literally up the street from my company. They simply opened up another business, musical instruments shop while the rest of us are left to pick up their tab!!!

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