FSCS chief questions 'unauthorised actors' as scams predicted to rise

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FSCS chief questions 'unauthorised actors' as scams predicted to rise
Carmen Reichman Caroline Rainbird, chief executive of the Financial Services Compensation Scheme

Speaking to FTAdviser, Caroline Rainbird said that in 2022 the FSCS expects compensation linked to pensions and investments to reach their highest level to date, driven in the main by self-invested personal pension operator failure and complex advice claims

Rainbird added: “Sadly, I also expect 2022 to feature yet more heartache caused by financial scams, ranging from out and out fraud to the grey area of unauthorised individuals playing their part in peoples' investment decisions.

“I question whether in a market where we have large numbers of regulated advisers we have a need for these unauthorised actors who cause a lot of distress and loss to people simply looking to invest for the future. 

“Much of this harm will continue to happen online and I truly hope much of this will also eventually come within the scope of new legislation.”

This amount of compensation is simply too high, driven by an inexcusable number of poor outcomes for consumersCaroline Rainbird, chief executive of the FSCS

As FSCS goes into its 21st year, the industry is facing an estimated levy of £900m.

“This amount of compensation is simply too high, driven by an inexcusable number of poor outcomes for consumers,” Rainbird said.

“Collective action is needed throughout the industry and regulatory landscape for this to change. From the plans I have seen so far, I believe 2022 will see us make some good progress but we should challenge ourselves collectively to go further and faster.”

Rainbird said it plans to implement improvements to how it works for the benefit of customers and levy payers alike and will continue to promote the service over the coming year.

Commenting on the FCA’s new rules on fee caps for claims management companies, Rainbird said she was “very pleased” with the fee caps.

From March 1, 2022, those customers who do choose to use a CMC will have their fees capped at a maximum of £10,000, which will mean more of the money they lost back in their pockets if they are eligible for compensation. 

“This change is something we supported, and we hope solicitors and other representatives will follow suit,” she said.

Reflecting on 2021

“When I reflect on what FSCS has experienced during 2021, one of the first things that comes to mind is pensions,” she said. 

  FSCS chief Caroline Rainbird says supporting British Steel workers has been a 'significant piece of work'

“Pensions advice and switching claims continue to be the most challenging we work on, and raising awareness and understanding of our protection in this area has been a key focus of our consumer awareness campaigns throughout the year.”

Rainbird explained that supporting former members of the British Steel Pension Scheme has been a significant piece of work and the body has worked together with the Financial Conduct Authority and Financial Ombudsman Service this year to encourage steelworkers to come forward and discuss their options.

She said: “I have spoken recently about the challenges we have in this space with our compensation limits. FSCS's limit of £85,000 for financial advice is far below the £355,000 that the Ombudsman can award if they uphold a complaint.”

In the year to March 2021, for pensions advice, customers lost over £104m on valid claims that the FSCS was not able to put back into their pockets purely because of the limit. 

This 'uncompensated loss' came to an average of £108,000 per person - and often occurred at a time when they were close to the age they had hoped to retire, with little time to recover this gap between limit and loss.

This type of claim has increased 26 per cent year on year for the past four years, and Rainbird argued that now is the time to look at the limit again and re-examine whether it is still appropriate for the future.

She added: “I'm not sure I could talk about 2021 without mentioning how working habits have changed, undoubtedly accelerated as we continue to experience the impact of Covid-19. 

“FSCS started to return to the office in the summer, after over a year away due to the pandemic. We have now settled on a smarter working pattern that works for us and are using our '5 C's' - connection, collaboration, creativity, compassion and celebration - as the drivers for spending time together in the office.”

During this period of remote and now hybrid working, she said the FSCS has “achieved a great deal” such as record customer satisfaction, strong people engagement scores and successful projects including the launch of the London Capital & Finance compensation scheme on behalf of the government within just a few months.

“I am extremely proud of how our teams have supported each other and delivered amazing things whilst getting used to a new rhythm in their working lives,” she said.

sonia.rach@ft.com

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