Financial Services Compensation Scheme  

FSCS boss regrets 'burden' of advice levy

 

The chief executive of the Financial Services Compensation Scheme has said she appreciates the "burden" placed upon the industry by its levy and expressed her regret.

In an interview with FTAdviser, Caroline Rainbird admitted the recent increase to the levy to be paid by advisers this year was "regrettable" but said it was necessary to crack down on phoenixing and pay consumers stung by self-invested personal pension-related issues. 

In the FSCS's initial forecasts for the levy and potential claims volumes for 2020-21, the overall cost was estimated to be £635m - up by £87m on the total for 2019-20.

As FTAdviser reported last month, advisers were furious over the levels of the increase, which means they will be expected to pay £213m towards the levy for the coming year - almost 13 per cent more than the previous year.

Responding to advisers’ concerns, Ms Rainbird said: "The main driver for that increase is compensation paid for Sipp-related claims, a trend rising over the past few years. Regrettably, we can only see that continuing to increase - at least for this year.

"We recognise without all our levy payers, all 50,000 of them, we wouldn’t be able to run the scheme and provide compensation to consumers.

"In paying that compensation, it restores their trust in the financial services industry."

In December the lifeboat scheme also warned advisers would have to pay a share of a £46m interim levy for the current year, with some advisers receiving bills for an additional £30,000. 

But Ms Rainbird sought to reassure the industry, promising the FSCS was working "collaboratively and collectively" to reduce bad consumer outcomes and ultimately reduce the levy.  

She added: "But the initiative really does have to come from across the industry and we will play our part and do what we can to support that. 

"I am very aware that without the industry we wouldn't be able to operate and I'm aware of the burden that places on the industry." 

The FSCS boss said its work on phoenixing, which the scheme is set to double down on this year, has already begun to deliver results. Ms Rainbird said since September she has witnessed an increase in the number of regulatory actions against firms and individuals who "should not really be acting in [the advice] space". 

She added: "We are working very closely with the FCA and reporting on data of directors and advisers who have been involved in firms we have declared a default on.

"The FCA is able to use that data to make sure people who have caused problems in the past are not coming back in to the industry to cause exactly the same problem again."