Pensions  

Treasury poised to intervene on PI

Treasury poised to intervene on PI

The government is open to intervening in the professional indemnity insurance market to make it work for advisers, Keith Richards has said.

The Personal Finance Society chief executive told FTAdviser that HM Treasury officials were "quite receptive" to a solution he had presented to solve the problem advisers are facing at the point of renewing their insurance cover.

Following changes to the Financial Ombudsman Service compensation limit in April advisers have been hit with higher premiums on their PI policies, higher excesses, more restrictions, and even new policy structures such as shared liability.

The Fos limit increased from £150,000 to £350,000 on April 1 as part of plans to allow small businesses to use the claims service.

In a meeting with the Treasury at the end of April, Mr Richards suggested the government should introduce a protection levy – a proposal the PFS had first made when the Financial Conduct Authority consulted on the Financial Services Compensation Scheme funding reform in 2018.

This would take the form of a savings and investment monetary protection and education levy, collected centrally by government and paid into a pooled risk-based fund.

The underlying idea of the levy is that it would be covered by a relatively small deduction of about half a basis point from the total funds under management per year in the UK, about £9.1trn in 2017.

But advisers and industry would also contribute to the fund, which would pool the risk and in turn dispose of the current need for PI insurance.

Mr Richards said: "It would provide additional funding for the Single Financial Guidance Body [now the Money and Pensions Service], provide additional funding for financial education and protect consumer rights to access safeguarded benefits under pension freedoms."

He said a number of potential quicker interventions were also discussed at the meeting, but he declined to provide any details on these.

Mr Richards noted whether the Treasury adopts this solution on not, the important part is that the PFS was "trying to provide solutions that provoke further thinking".

He said: "There is some light at the end of the tunnel, but that doesn't help those advisers that are feeling the impact here and now. So, we have got to keep raising this issue."

Mr Richards said a further follow up meeting had been scheduled with Treasury officials.

Mr Richards said: "Treasury [officials] aren't always able to commit themselves, but there was a willingness to engage and consider the issues more broadly.

"We shouldn't underestimate that these things don't change overnight, but at least the government is engaged in the debate and they're aware.

"The challenge with making any changes is that it does need a legislation change."

Brian Hill, managing director & financial planner at Jones Hill, said: "This horse has very much bolted. Seemingly the Treasury is now left to try and pick up the pieces of what many pension transfer specialists view as the FCA's shambolic, knee jerk reaction.