Advisers have been given one month to pay the latest interim levy from the Financial Services Compensation Scheme, despite some bills requesting as much as £30,000 on top of full-year payments for 2019.
In December, the lifeboat scheme warned advisers would have to pay a shareof a £46m interim levy this year, in light of a growing number of pension advice claims that are increasingly complex and costly.
The additional bill includes a contribution from providers in the life distribution, pensions and investment sector and reflects a jump of £44m in the compensation the FSCS expects to pay out this year
Advisers have now begun to receive their additional bills, with a deadline of 30 days to make payment.
David Penney, director at Penney, Ruddy & Winter, said on Twitter: “How is it acceptable to get a bill for £4,500 out of the blue with one month to pay?"
Another adviser, who did not wish to be named, faces an additional bill of £30,000 on top of a £150,000 levy paid last year.
An FSCS spokeswoman defended the 30-day period as according with Financial Conduct Authority handbook rules, but said if a company was unable to meet the deadline they were “free to arrange financing”. She added: “As the regulator of consumer credit, it is not appropriate for the FCA to offer credit or [the possibility of] paying fees and levies by installments.”
Garry Heath, director general of trade body Libertatem, said he was aware of smaller companies for which paying a significant bill at short notice would have notable consequences.
He said: “Some businesses will simply not have the money, or will have the funds but may then not have sufficient capital adequacy – it is draining capital adequacy to pay the bills of someone else.
“We are being asked to pick up the tab on claims when regulators have failed on the job in many cases. But it’s not coming out of their pockets, its coming out of ours and of those who are effectively still taking advice.”
Mr Heath said such costs were “killing the industry” as an increasing number of advisers found themselves unable to meet their regulatory bills.
Earlier this month, the FSCS outlined its initial forecasts for the levy and potential claims volumes for 2020-21, with the overall levy estimated to come in at £635m. This would be £87m more than the total for 2019-20, a leap that the FSCS primarily attributed to a rise in the number of self-invested personal pension claims.
Advisers will be expected to pay £213m towards the levy for the coming year, almost 13 per cent more than the previous year.
In the Heath Report Three, published at the beginning of last year, Mr Heath found 1,650 advisers had immediate plans to retire and 5,280 advisers planned to exit the profession in the next five years.
But Mr Heath told Financial Adviser he now estimated that several thousand advisers may have left the industry in the past year.
He added: “We all know the problem is we’ve got huge costs and a regulatory system which sees itself as Father Christmas in terms of payouts. Perhaps we can persuade the government to change the regulation, which is causing the destruction of advice.”
rachel.mortimer@ft.com
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