Edinburgh-based life and pensions company Aegon has warned the UK’s Financial Services Compensation Scheme (FSCS) not to hit IFAs too hard and instead spread its increased compensation levies across the industry as a whole, or risk losing advisory firms in the UK.
Yesterday, as reported, the FSCS said that it is to introduce three new supplementary levies to meet ‘unforeseen’ compensation costs, as SIPP claims in particular have risen.
And a result UK financial advisers will be called upon to pay additional levies of £270m of the £378m that the FSCS has set as expected management costs and initial forecasts to be paid by whole of the industry. But Aegon has called for the FSCS to rethink its plans and look to spread the the levies cross the whole industry including more support from providers, fund managers and intermediaries.
Steven Cameron, pensions director at Aegon said that yesterday’s announcement regarding further increases in FSCS levies for life and pensions intermediaries “highlights how important it is to overhaul the sharing of compensation costs across all industry players alongside a greater risk-based focus”.
“With the £100m levy cap on life and pensions intermediaries being exceeded for the first time, there will be some sharing across other categories in the retail pool but more needs to be done to avoid overburdening the wider population of intermediaries,” he said
“With the prospect of growing and volatile fees caused by claims often generated by a very small number of firms, the FSCS needs to be both forensic in identifying causes, but fairer in sharing compensation across the whole industry including providers, fund managers and intermediaries.”
Cameron pointed to the importance of the financial adviser adding that individuals need access to professional advice and intermediation, “today more than ever”, as people take on “greater personal responsibility for their financial futures”.
The FSCS predicted the total number of compensation claims made by individuals against the industry will fall next year following the recent spike, but it warned that the trend of rising numbers of complex life and pensions cases will probably continue, resulting in “materially higher” costs looking further ahead.
The £270m figure is the total amount the FSCS has today announced it will be asking for from life and pensions, mortgage, and investment advisers combined for this year and next. The indicative levy for 2017/18 for life and pensions advisers alone will be £171m – a £45m increase on the current year.
A final decision on the levy amount will be made by the FSCS in April.