Regulator attitude to pension expansion might drive higher FSCS bills
Financial advisors fear that changes to pension regulations could drive up bills.
Plans are underway to extend the Financial Services Compensation Scheme to cover trustees in charge of the pension schemes belonging to large companies. There are fears that the proposal being put forward by the Financial Conduct Authority will have the knock-on effect of raising the levy costs of financial advisors.
At the moment, trustees of defined contribution schemes of large companies can only make claims on the FSCS if the scheme in not run by a large business, which is defined as a company with a turnover of more than £6.5 million, a balance exceeding £3.26 million, or one that has more than 50 employees on the payroll.
The FCA has said the cost of allowing the scheme to cover large companies’ schemes would fall on investment or life and pension intermediaries.
It is feared the move by the FCA could lead to an increase in compensation costs and management expenses. The FCA has estimated the increase could be as much as £5 million a year.
The consultation paper regarding the proposed expansion of the scheme is open until 29 February next year.
FSCS changes face criticism
The proposal has not found favour with everyone in the financial sector.
As always, it is expected that these increased costs will be passed on to the clients and the management fees will go up.
It has been argued that large companies should be able to fund their own wrongdoings and pay compensation out of their own assets.
There have also been calls to reform the way the FSCS is funded. Suggestions include introducing a product levy or increasing the run-off cover for financial advisors who are retiring.
Ways to keep on top of the financial game.
With ever-changing rules and policies, it is important for advisors to always make sure their paperwork relating to clients is current and up-to-date.
A practical and efficient way to handle office management systems is to use software for financial advisors that looks after the paperwork so advisers have more time for their clients.
A specialist company such as http://www.intelliflo.com/ can provide advice about the best software for financial advisors and their companies.
By keeping on top of the laws and management of clients, it is hoped advisors will stay ahead of the game.