The Financial Services Compensation Scheme wants the Financial Conduct Authority to review the maximum £50,000 payout for investments, including those held within a self-invested personal pension.
The FSCS’s annual report, published today (16 July), revealed that the compensation scheme is “very keen” to discuss protection limits with the FCA and Prudential Regulation Authority as part of their forthcoming review of protection and funding.
The FSCS pension payouts were questioned following the implementation of the pension freedoms.
Amid questions over the in-tray of new pensions minister Ros Altmann, 20-20 Trustees director Nigel Jones asked whether the £50,000 protection offered to defined contribution investments should be raised by the new government.
He said this should be a consideration, given the large amount of individual wealth built up in such pensions, and the fact that savings are protected up to £85,000.
However, Fidelity’s retirement director Alan Higham warned the challenge lies in the fact there are so many unregulated investments that have a much higher potential to blow up, or indeed to be fraud.
“If a rogue adviser recommends unregulated [investments] that blow up, then the limit of compensation for the bad advice is £50,000.
“I’m already concerned that far too many good advisers have to pay the price for the failings of the few bad advisers... Helping people find a reliable adviser with proper PI cover who is very unlikely to cause any losses that could not be paid out on would also be ideal.”
In April, the FSCS announced life and pension advisers are to be hit with a levy of £100m in 2015 to 2016, up by 75 per cent from the January forecast of £57m and three times the £33m levy last year.
The FSCS said this was largely due to a continuing surge in self-invested pension claims. It included a number of case studies in its ‘outlook’ citing claims against a range of esoteric and unregulated investments which have been wrapped into Sipps
The soaring bill for this year comes on top of, and just a month after, the FSCS confirmed a £20m interim levy for life and pensions intermediaries, relating to “bad advice” given on Sipps.
Following this, advisers and others called for radical solutions, including intermediaries willing to advise on unregulated investments being carved out from the rest of the sector for the purposes of the compensation scheme.
The current level of protection for deposits is £85,000 and this will continue until 31 December 2015. From next year, the new limit will be £75,000, the FSCS announced earlier this month.
donia.o’loughlin@ft.com
