The Treasury has reject an IFA’s call for fines collected from the financial services industry to offset the Financial Services Compensation Scheme fee increases caused by unregulated investments held in self-invested personal pensions.
Phil Castle, IFA at Financial Escape, wrote to the Financial Conduct Authority earlier this week, stating that while he is willing to pay fees for the FCA, the Money Advice Service and the Financial Ombudsman Service, he is disputing paying his £3,000 FSCS fee.
In April, the FSCS revealed that pension and life intermediaries would be stung with a maximum £100m levy, a 75 per cent increase than that which was expected when the FSCS gave its levy indication earlier this year and three times last year’s bill.
The increase was driven by unregulated investments wrapped into self-invested personal pensions.
In July, advisers received their total regulatory bill, with the FSCS levy accounting for the vast majority of fees. One adviser, who declined to be named, told FTAdviser his total bill was £14,846, of which £12,403 was for the FSCS.
Mr Castle argued that the FSCS levy increase is due to the FCA failing to police the misuse of self-invested pensions and unregulated investments.
Currently, the financial penalties that the FCA receives goes to the Treasury due to rule changes made by the chancellor three years ago.
However, Mr Castle believes these fines should be directed to the FSCS to cover Sipps and unregulated investments during the interim “until this problem is solved”.
He said: “The Treasury have been trousering industry fines for non-financial services industry-related purposes and it is pretty much accepted now that the FSCS system is critically flawed.
“I am of the opinion the Treasury should be redirecting the fines to offset the FSCS fee increases caused by unregulated investments held in Sipps. This is a problem of government making and [the FCA’s] failure to identify problems with and regulate Sipps appropriately.”
A Treasury spokesperson told FTAdviser: “It is right that fines collected from the financial services industry, over and above enforcement case costs, are returned to the taxpayer.
“The government reformed this element of the system through the Financial Services Act 2012 to ensure that the bad behaviour of some banks was not subsidising the costs of the other.”
“It is for the PRA and FCA to determine the limits for levies on the financial sector which fund the FSCS, and to consider the impact of the levies on firms.”
In an email to Mr Castle, the FCA clarified that being a recipient of a FSCS levy is not a reflection of a firm’s conduct, but is a calculation, applied uniformly across all firms in the relevant fee block, as a percentage of the reported eligible income.
The FCA wrote: “I can confirm that we do consider the FSCS levy to be correctly raised based upon your fee tariff data provided and that any dispute against a regulatory fee invoice will be assessed in accordance with the FS handbook.”
Mr Castle told FTAdviser that he is not disputing the method of calculation but paying out on things that he does not advise on.
“My FSCS fee this year is £3,000 which is 2.7 times last year’s and 10 times the lowest it has been. This confirms the FCA is failing with regulation, as something has clearly gone wrong in the background with Sipps and unregulated investments.
“A Sipp is ‘self-invested’ and is not a mainstream product but it is regarded as one. Providers should not use Sipps as a main product.
“The FCA won’t discuss the FSCS levy, and no one in the industry thinks the levy is right.”
The FCA declined to comment.
donia.o’loughlin@ft.com
