Pensions  

FSCS stokes adviser fees fire with huge hike in final levy

FSCS stokes adviser fees fire with huge hike in final levy

Advisers complaints over the regulatory fees burden on their businesses are set to ramp up further after the Financial Services Compensation Scheme announced a rise in the final levy for the coming financial year, including a 300 per cent rise for pension intermediaries.

Life and pension advisers are to be hit with a levy of £100m in 2015/2016, up by 75 per cent from the compensation scheme’s January prediction of £57m and three times the £33m levy on the sector at the time of the annual levy last year.

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 Financial Services Compensation Scheme confirmed a £20m interim levy for life and pensions intermediaries relating to “bad advice” given on self-invested personal pensions.

Overall FSCS has announced a final levy for the industry for 2015 to 2016 of £319m, a £32m increase from its January prediction of £287m.

There was, though, good news for firms in other sectors. Investment intermediation firms, for example, will see a decrease in their levy bill, coughing up £116m, down £9m from the January forecast but still higher than the £112m levied last year.

This is because of a reduction in the costs relating to defaults, and an expected increase in recovery forecasts.

The general insurance intermediation sector will also not be receiving a levy bill in 2015 to 2016 for payment protection insurance claims, which have continued to decline.

In its outlook for the coming year, the scheme states: “In 2014, FSCS began to see claims from retail consumers whose pension savings had been moved to Sipps from traditional pension plans... and who had very limited investment experience.

“Attracted by the prospect of very high and sometimes unrealistic investment returns, consumers were encouraged by introducers to make selections from a range of alternative investment propositions to invest their Sipp funds.

“These included overseas timeshare property developments, forestry plantations (either in the Far East or Australia) from which fuel oil was to be derived using unproven technology, carbon credits, gold and South American farmland.

“[In January] 2013, the FSA first published concerns that firms were advising on pension transfers or switches to Sipps without assessing the advantages and disadvantages of the underlying investments to be held in them.”

Mark Neale, chief executive of the FSCS, said: “FSCS protects consumers when financial firms fail. We’re there for people who have nowhere else to turn. The annual levy allows us to compensate consumers, and as a result, make a valuable contribution to consumer confidence.”

Since its inception in 2001 FSCS has paid out more than £26bn to more than 4.5m people.

emma.hughes@ft.com

Additional reporting by Donia O’Loughlin