A consultation paper detailed several amendments to the compensation rules, including an increase in the non-investment insurance mediation compensation limit in relation to some types of insurance from 90 to 100 per cent, and changes to make express reference to how the compensation rules apply where a successor firm is in default.
It also proposes changes to the eligibility of occupational pension schemes trustees to claim on the FSCS, as currently, defined contribution trustees are only able to claims if the scheme is not run by a large business.
The FCA defines a large company as one which meets two of the following criteria: a turnover of more than £6.5m, a balance sheet of more than £3.26m or more than 50 employees.
The consultation stated the cost of extending the scheme to large company schemes would fall on investment intermediaries, but the regulator confirmed to FTAdviser that it would also fall on life and pension intermediaries.
This would be calculated as part of the FSCS levy, although the FCA could give no further detail as to when the levy increase would occur.
The paper explained that extending eligibility to claim on the FSCS to trustees of money purchase occupational pension schemes with large employers will lead to an increase in the cost of compensation and related management expenses, paid by the FSCS.
“This will be met by firms – in particular, firms in the investment intermediation funding class at the time of a relevant FSCS levy,” the document read.
The FCA estimated the increase in costs to fall between £640,000 and £5m a year.
The lower estimate was calculated based on the assets held by these schemes and possible claims arising from loss of clients and assets, while the higher figure was based on the number of members in these schemes and possible claims arising from negligence.
Changes are being proposed now, ahead of the review of the FSCS funding model and compensation limits in 2016, “because the changes have no impact on that review, will provide benefits for consumers and for the FSCS and will, we anticipate, have minimal cost implications for levy payers”, according to the document.
Comments and suggestions are encouraged, with a deadline of 29 February 2016. Rules will then be published as part of a policy statement during the second quarter next year.
Separately, an update from the FSCS yesterday contained a statement from chief executive Mark Neale that it is unlikely to raise any supplementary cash from the industry to meet claims in 2015/16.
The scheme said it was continuing to receive self-invested personal pension related claims, but did not anticipate their value to climb above that forecast in April, adding that it was also on track to pay lower compensation than forecast for the investment intermediation group.
“I’m pleased on this occasion to be able to say that we do not currently expect to have to raise a supplementary levy this year on any sector of the industry,” commented Mr Neale. “Many firms will, however, regard it as cold comfort in view of the levies they have already paid.
“I sympathise with advisers in the life and pensions sector who have been hit hardest by the financial impact of these claims. It underlines the importance of the FCA review of FSCS funding in 2016 which will give a fresh opportunity to review the way these financial impacts are shared across the industry.”
In the spring, 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 it gave a levy indication earlier in the year, and three times last year’s bill.