“We can all, I‘m sure, think of possible ways forward,” said chief executive Mark Neale in his most recent blog on the FSCS website, referring to an angry call he’d received from an IFA who had argued that the “blameless were picking up the bill for the blameworthy”.
In April, the FSCS announced that the levy for life and pensions advisers was £100m for the 2015-16 tax year, a figure that was almost double what was expected due to the rising cost of Self-Invested Personal Pension (SIPP) claims.
Neale said, however, that the FSCS and regulators will not escape levypayers’ anger unless there is consensus across the industry. “Please help to create that consensus. You can help us to shape a better funding system if you get involved.”
“I appreciate that industry support for FSCS is put at risk if there is a perception that our funding arrangements are unfair,” he added.
Alternative options
Neale suggested fragmenting the current funding classes to reflect the different business models in use, but warned that “narrow pools” are much more vulnerable to big failures, which would therefore put consumers’ security at risk.
His second suggestion was to retain the existing classes, but adjust the underlying levy base to reflect risk, as the levy base currently reflects firms’ shares of the relevant business.
But he advised that the latter suggestion would only work if the measures of risk are objective and transparent and correlate with the risk of firms failing, while advisory firms must also be willing to accept that the measures are fair.
“If you think the current arrangements are unfair, please tell us what would be fairer.”
