The chief executive of the Financial Services Compensation Scheme has said he would like the scope of its protection to be addressed, in terms of harmonising with regard to the retirement savings.
At present, long term insurance products are protected at 100 per cent of their value without any limits but investment products are protected up to £50,000.
This means that if the firm concerned has gone bust and cannot return the money owed, and someone loses their money because of bad or misleading investment advice, negligent management of investments, misrepresentation or fraud, then the FSCS will protect up to £50,000 per person, per authorised firm.
However, Mark Neale would like to see the way these products are protected made the same, to make it easier for consumers to understand how safe their cash is.
Speaking to FTAdviser, he said: “The other side of the funding coin is the scope of FSCS protection and as you’ll know at the moment our protection is by product, so we protect long term insurance products at 100 per cent of their value without any limit, but we protect investment products up to £50,000.
“I think that as the retirement savings market liberalises, it is quite confusing for consumers, not least because many long term insurance products and investment products are pretty close substitutes for one another.”
As such, Mr Neale said he would like the Financial Conduct Authority’s funding review of the FSCS, which is due get underway in autumn this year, to look at the case for harmonising its protection regime.
Commenting on whether he saw that harmonisation manifesting itself as having one figure for everything across the board, Mr Neale said that is the direction he would like it to go.
“But first of all I’d focus on the retirement saving area, because that is where choice has opened up for consumers and where they are likely to be making choices between insurance products and investment products; so where it seems to me there is the strongest case for harmonisation.
“I’m not sort of going to say there’s only one possible way of harmonising - there are obviously lots of different options you could look at - but I think it’s a good time to look at that as part of the funding review.”