Advisers criticise FSCS after interim levy

Advisers criticise FSCS after interim levy

Advisers have criticised the Financial Services Compensation Scheme after firms were sent invoices for their share of a £20m interim levy.

Nick Bamford, executive director for Surrey-based Informed Choice, said his firm had received an invoice for nearly £3400 on 23 March, with the amount due by 22 April.

He said: “It is really tough in this regulatory environment to plan ahead of expenditure when you get stung with bills like this at short notice.

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“We really need a change to the system so the polluter pays. A product levy on high-risk investment sales would be my preferred approach.”

Simon Webster, managing director of Kent-based Facts and Figures Financial Planners, said his firm had received a £900 invoice.

In a statement to confirm the £20m interim levy on 19 March, the FSCS said: “Driving the interim levy are the costs and volume of claims relating to bad advice by financial advisers to transfer funds from existing pension schemes into self-invested personal pensions.”

Simon Mansell, managing director of Worcester-based IFA Temple Bar, said: “It is somewhat irksome that a regulated adviser should pay for a non-regulated investment. In many cases these claims arise from Sipps invested in non-regulated asset classes typically offshore property schemes perpetrated by crooks.”

He added: “The director of the offending firm should be found personally liable for corporate torts where they actively participated or acquiesced, knew or had reason to know of the wrongful conduct or activity.”

Right to reply

Mark Neale, chief executive of the FSCS, said: “FSCS has a duty to pay compensation claims as they fall due and that helps to promote consumer confidence. The costs of SIPPs claims are rising so we have no choice but to issue this levy to the firms that pay for FSCS protection. This interim levy will cover the costs of compensation claims until the next annual levy is available in July 2015.

“In January this year we advised the industry that the volume of claims could increase. We also indicated the forecast compensation costs could materially increase if FSCS compensated for investment losses. This is now the case.”

“I know this will be unwelcome news for firms facing a supplementary levy. We will continue to do all we can to provide more certainty for firms but we cannot entirely eliminate volatility in what is a pay-as-you-go funding arrangement.”