Levies and gold standards: the week in news

Levies and gold standards: the week in news

Brexit took a backseat this week as local elections dominated politics, along with the sacking of former defence secretary Gavin Williamson. 

Closer to 'home', the industry shouldered a higher-than-expected levy and the taxman revealed it had received £4.4bn more than expected in pensioners' income tax. 

It's time for the week in news.

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1 Rising levy but good news for advisers 

Earlier this week the Financial Services Compensation Scheme announced a levy of £532m for this financial year, an increase on its original forecast, which it attributed to an "uplift" in the number of claims expected against self-invested personal pension operators.

The levy was £16m higher than expected, but those in the life distribution, pensions and investment intermediaries sector saw their levy decrease from the £175 originally predicted in January's plan and budget to £153m, a saving of £22m. 

The lifeboat fund confirmed it expected the main driver of compensation costs falling on the FSCS this year to be pension claims, with the majority "continuing to arise from bad advice to transfer retirement savings out of occupational schemes and into Sipps". 

2 Going for gold 

It's been a turbulent month for the advice market following the rise to the Financial Ombudsman Services' compensation limit, with advisers telling of their struggle to find professional indemnity insurance amid rising premiums and excesses.

This week saw a further development from a big player in the PI market, Liberty, which confirmed it will take into account the Personal Finance Society’s Pension Transfer Gold Standard when underwriting an advice firm.

Liberty stated it will ask firms that want cover for defined benefit transfers going forward whether they have achieved or applied for the gold standard and stressed it would be one of the conditions affecting the PI policy.

Keith Richards, chief executive at the PFS, hinted other insurers had indicated they would also require advisers to confirm a commitment to the standard but did not disclose any names.

3 Barriers to platform switching 

Complexity, cost and suitability concerns are dissuading advisers from switching clients to a different platform, it emerged this week.

Research from consultancy the Lang Cat found over the long-term, the differential in charges between different platforms was enough to justify transferring, but the cost and complexity of undertaking such an action meant 56 per cent of the advisers were unwilling to recommend a transfer. 

The Lang Cat's research, which involved 95 advice companies, found it would cost £1,155 to transfer clients to a new platform and take 20 hours.

The Lang Cat's Mark Polson said: "Many advisers told us that they will move new clients to different platforms, but keep the existing book of clients on the old platform due to the complexity, but we think that if the advice firms' processes are good enough, and the platforms are on their game, then it could get down to three hours to do a transfer.