Your IndustryAug 26 2016

PFS contacts new chancellor over FSCS concerns

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PFS contacts new chancellor over FSCS concerns

Personal Finance Society chief executive Keith Richards has contacted the new chancellor to press the case for reforming the Financial Services Compensation Scheme.

Mr Richards has argued under its current format the FSCS is not sustainable because it is responsible for an ever-expanding liability which it has to cover from a shrinking pool of resources.

The Financial Conduct Authority is currently reviewing the FSCS levy with a view to making it fairer for advisers, but it has already ruled out the prospect of a product levy which is popular in the industry.

The introduction of a product levy - or wider reform of the FSCS beyond its levy - would require HM Treasury to introduce legislation, which is why Mr Richards has pressed the case with the new government.

He said: “The FSCS is now a massive pool of unspecified liability built up over a couple of decades, a lot of which comes from firms which have long left the sector.

“How it is funded is key but simply shuffling around how we pay for it is missing the point.

“It is unfair to expect existing incumbents to keep funding that pool - but that’s not to say they shouldn’t make some contribution.

“The FSCS does potentially feel like an unsustainable model so addressing how it is funded is only part of the issue.”

He said that as time passes and the FSCS takes on the liability for more firms this issue would only become more pressing.

Mr Richards said he had raised this issue with the Treasury before but has now put his case to the new Chancellor, Philip Hammond.

The Financial Conduct Authority has been reviewing the FSCS levy this year and has been paying particular attention to its fairness for financial advisers.

In March then-FCA chief executive Tracey McDermott said the review into FSCS funding would probably take a year.