The Financial Services Compensation Scheme deals with consumers where their advisers are no longer in business and where bad advice has been given.
According to the Chief Executive of the FSCS, the organisation needs to raise over £80m to cover pension (£55m) and endowment complaints (£33.2m). The FSCS also needs to raise £130m to cover complaints against firms offering general insurance that are no longer trading.
Our View
The FSCS is a last resort for policyholders where their advisers are no longer around to deal with complaints and put things right. The work done by the FSCS is valuable and the reasons for the cost increases have generally come from industry reviews, instigated by the regulator, the Financial Services Authority. But, for products such as endowments where there has been no formal review, publicity has played a major part in getting the public to look at the advice they were given.
The costs have risen this year because of the ongoing problems with pensions and endowments. We expect these costs to reduce over the next few years.