The FSCS is the UK’s official statutory deposit insurance and investors compensation scheme for customers of various financial assets including pensions, bank accounts, mortgages and investments. Where approved financial companies fail, customers with those companies can have their assets protected to certain extents and the FSCS will automatically issue compensation to eligible consumers.
“Reform is now urgent but will take time. HM Treasury must find other sources of revenue to cover these extreme costs.
“The fairest source are FCA levies, which ensures polluters pay and it remains an industry funded regime.
“We have put forward a number of recommendations to the government and the regulator, which we think will reduce the bill over time but crucially ensure that firms do not fail in the first place.
“We want to work collaboratively to ensure that these continued rises in compensation claims are brought to an end.”
Currently, if a person holds money with a UK-authorised bank, building society or credit union that fails, they’ll automatically be compensated by up to £85,000, with joint accounts receiving up to £170,000.
For mortgages and investments, it is also sitting at £85,000.
Retirees can have up to 100 percent of their claim protected if their provider fails, with no upper limit.
SIPP holders will be limited to £85,000 and a person can also receive compensation if they’ve received bad pension advice.
It should be noted that within FSCS’s Plan and Budget, Marshall Bailey, the organisation’s Chairman, highlighted they remain open to collaboration, as quoted: “To promote greater simplicity, we support exploring how to prevent unsuitable high-risk products being sold to mass-market consumers.
“This could include implementing a higher levy for firms that include them in their product portfolio. Recent failures have demonstrated that consumers may not always understand what is and isn’t a regulated product.
“Changes are necessary, and may lead to a more clearly defined, restricted set of protected product choices for mass retail customers. Many products are simply not suitable for the majority of customers and most people would be better guided towards a narrower scope of products, with appropriate protections, and away from those that can lead to the sort of losses that drive-up the levy.
“We accept that we do not have all the answers, but we are well positioned to work with HM Treasury and the regulators to find them. The crucial point is that the industry, the regulators and FSCS need to come together to plan out what action needs to be taken. No one solution will resolve these long-standing issues.
“However, with appropriate support from the industry, a combination of measures backed and delivered by all stakeholders has a chance of succeeding and delivering a service that works for consumers and levy-payers alike. “
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