Calls for increased regulation following rise in FSCS bills
The FSCS levy for 2020/2021 was released earlier this year, causing frustration amongst many advisors in the sector. That frustration continues, with the FSCS making large compensation payments in respect of defined benefit (DB) transfers where many question the lack of earlier FCA intervention, which might have alleviated the problems in this area.
The FSCS levy for the 2020/2021 financial year rose to £649m up from £549m last year and exceeded the amount forecasted in the FSCS' Plan & Budget announced in January 2020.
The FSCS has explained that it is continuing to see an increase in pension related claims, albeit that it has in fact reduced its forecast for the anticipated cost of SIPP operator claims.
Advisor frustration at the large FSCS levy increases has not been quelled by recent news that the FSCS has just paid £1.2m to investors advised by Capital & Income Solutions (now in liquidation) that provided DB transfer advice. Furthermore, that sum is only applicable to 20 claims and it is anticipated that there are over 600 pending.
There has been much commentary from the advisor community, many of whom feel that they are being punished for the mistakes of others by having to pay increased FSCS bills and that proactive steps by the regulator may have stopped the behaviour that led to compensation payments in the first place. Many advisors believe that the regulator only steps in once it is too late and more should be done to identify firms that are in breach of regulations which would, in turn, protect financial advisors from increased bills in the future.
No formal protest has been put to the FSCS so far but given the market uncertainty caused by the pandemic in 2020 and the likelihood of further FSCS claims linked to poor investment advice, it would appear that the 2021/2022 FSCS bill is only likely to rise further still.