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FSCS levy and FTSE danger zone: week in news

FSCS levy and FTSE danger zone: week in news

So we've all found ourselves back at our desks this week, bloated by food and Christmas cheer, and maybe we need a helping hand to get us back into the news cycle.

But fear not! That is what we are here for. It is time for the week in news.

1) Season of badwill

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Now the season of giving is over, the Financial Services Compensation Scheme has decided to do a bit of taking.

The FSCS has announced it is to raise an additional £23.9m from financial advisers and the wider industry, following greater than expected claims about self-invested personal pensions.

The scheme said it in its latest Outlook publication it had expected the costs to be higher than the amount levied on advisers for this year but decided to limit the levy with a view to raising any extra amounts needed later in the year.

This has been welcomed by financial advisers as warmly as reheated turkey served up more than a week after Christmas.

Sipp claims have been a major factor in raising the cost of the FSCS on advisers in recent years.

The scheme's latest annual report, out last July, showed compensation paid to investors holding their pensions in Sipps went up 35 per cent to £105m in the year.

2) In other news...

Judging by this week, it hasn't been a happy new year for the FSCS so far.

As well as facing criticism for raising more money from financial advisers, it has also admitted to making errors in handling around 2,000 claims about failed fund range Arch Cru involving £1.5m.

The FSCS said it has made under-payments of £814,000 to 1,075 customers and over-payments of £702,000 to 992 Arch Cru claimants in the five years since 2012.

The issue only came to light after a customer complained last year, following which the scheme reviewed its systems to rectify the issue, it stated.

The FSCS said it has made good to those underpaid but could not guarantee it would be able to recover all of the amounts overpaid.

By June 2016 the lifeboat fund had paid a total of £58m to investors affected by the failure of Arch Cru.

3) Woodford predicts unhappy new year

Neil Woodford thinks it is the end of the world as we know it, but he feels fine.

He has said he expects the stock market bubble that has hampered the performance of his flagship £8.2bn Woodford Equity Income fund will burst this year.

2017 was a torrid year for the fund, which returned 0.53 per cent in the 2017 calendar year, compared with over 11 per cent for the average fund in the IA UK Equity Income sector in the same time period.

Mr Woodford attributed the poor performance to his being heavily invested in sectors such as banks and housebuilders, while the market has focused on areas such as mining and on big international earning businesses.

He said he has been "steadily increasing" his exposure to shares exposed to the UK domestic economy, such as house builders and banks, as he feels those parts of the UK market represent a "compelling investment opportunity".