"To see revised proposals include the removal of protection from the pensions class is positive as this will greatly impact mortgage intermediaries’ bills."
The FCA is also consulting on merging the Life and Pensions and Investment Intermediation funding classes and moving pure protection intermediation from the Life and Pensions funding class to the General Insurance Distribution class.
The Association of Mortgage Intermediaries backed the move, stating: "With the majority of claims in the life and pensions intermediation class relating to mis-sold SIPPs, it is grossly unfair that mortgage firms as the primary writers of life insurance have been paying a disproportionate amount of investment advisers’ invoices despite no connection between the two business lines."
Additionally, the FCA will seek to increase the FSCS compensation limit for investment provision, investment intermediation, home finance and debt management claims to £85,000.
The FCA is also seeking views on other options for reducing harm to consumers, intended to give firms incentives not to carry out activities which have led to FSCS claims in recent years, and also to reduce the value of claims the FSCS has to meet.
In its paper, the FCA said it is considering requiring certain Personal Investment Firms – particularly those with exclusions on their Professional Indemnity Insurance policy - to pay money into a trust account or purchase a bond that would ensure more claims are paid for by firms or their insurers.
Robert Sinclair, Chief Executive of AMI, commented: “We have been tirelessly lobbying several issues with the FSCS structure and we are pleased that the significant work we have carried out with the FCA over the last year is materialising. To see revised proposals include the removal of protection from the pensions class is positive as this will greatly impact mortgage intermediaries’ bills. The fact that the FCA has decided to re-consult with industry rather than proceeding with one of the proposals set out in the last paper is encouraging. They have not only listened to our concerns but are openly engaging with industry to ensure that they implement the fairest solution.
"We are pleased that the FCA has recognised that providers are also responsible for the distribution of their products. Whilst the proposed provider contribution of 25% is not as high as we had hoped for, it’s a step in the right direction."
The consultation paper, published today, also contains the final rules for changes to FSCS funding which were consulted on in December 2016.
The new rules include:
- introducing FSCS coverage for debt management firms
- extending coverage in respect of fund management
- applying FSCS protection to advice and intermediation of structured deposits
- requiring the Society of Lloyds to contribute to the retail pool
- introducing additional reporting requirements which will potentially enable the FCA to introduce risk-based levies in the future.
