The head of the City watchdog has ruled out a product levy amid growing calls to reform how the Financial Services Compensation Scheme is funded.
Speaking at a press conference today (September 24) Christopher Woolard, outgoing chief executive of the FCA, said a product levy was not "back on the table" as part of its plans to manage rising costs at the industry-funded lifeboat body.
It comes amid increasing calls for the way in which the FSCS is funded to be reformed, after the bill to be shouldered by advisers jumped by £16m to £229m this year.
The levy has predominantly driven the rising regulatory bills which have landed on adviser doorsteps in recent months, prompting some to call for the regulator to revisit the previously much-debated idea of a product levy.
But Mr Woolard said: "We have been through a review of the FSCS relatively recently and I think one of the difficulties we had with [the idea of a product levy] is often it reduces to a zero-sum game, so it becomes different sectors of the financial services industry really arguing that other sectors really ought to be picking up more of the bill versus them.
"The big question here for the future of the FSCS is how do we try and make the size of the pot as small as we possibly can."
A product levy has traditionally been popular among advisers and would be attached to the transaction and sale of product which would be added to its price and paid by the consumer.
In a Call for Input published this month the FCA said it was looking to adjust the funding structure for the UK’s financial compensation scheme in a bid to ensure “polluting” firms paid more of the bill.
Ultimately the regulator said it wanted to consider how it could achieve a system where "firms which cause harm end up paying more" of the FSCS costs.
But it warned there were "no easy answers" for how to shake up the structure to ensure a fairer system, but primarily floated ideas on pinpointing the firms likely to cause the problems before they go into default and burden the lifeboat scheme.
The FSCS attributed the rising cost of its levy this year to a growing number of pension mis-selling claims and an extra £44m set aside to meet claims against the collapsed London Capital & Finance.
FTAdviser recently spoke with advice firms which had witnessed jumps of up to 160 per cent in their regulatory bills over the past two years, compounding issues alongside a hardening professional indemnity market demanding higher premiums.
rachel.mortimer@ft.com
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