Adviser majority feel FSCS unfairly penalises firms
Research of almost 500 IFAs has revealed widespread dissatisfaction with the Financial Services Compensation Scheme (FSCS).
Carried out by PanaceaIFA, the results show an overwhelming majority of advisers – to the tune of 97% – believe the current system is unfair and penalises responsible firms for the malpractice of others.
The research, Panacea says, shows IFAs are calling for the FSCS to explain more clearly its charges and how they are balanced between staff, wages, pension contributions, administration and actual claim payments.
A look at the organisation’s accounts, however, does shed some light on the situation. In the year to 31 March 2012, the FSCS spent £47.3m on staffing costs including outsourcing and other related expenses, far exceeding the £37.6m budget after a 4.1% salary increase. Administration over the same period cost £64.62m, up from £57.4m last year.
The number of new claims received was 96,930, more than double last year’s amount of 39,499. The average payout was £4,362, down from the average last year of £6,640. The total amount paid out in compensation up to 31 March 2012, was £346.7m, down from £535.4m last year, and a major restructuring of the organisation, including redundancies, has cost £770,000.
The total recognised loss listed in the accounts was also £770,000.
The fact that the FSCS is branded opaque by the adviser community is perhaps unfair given that the organisation’s accounts are freely available on its website. Whether IFAs approve of the finances of the company however is a different matter.
Advisers are clearly dissatisfied with the scheme and feel it requires a shake up. The survey shows 52% of advisers fear their firm would not be able to afford an increase in the levies and 54% believe those receiving compensation should have an excess deducted from the total.