The announcement today by the FCA that it is planning to more than double the compensation limit at the Financial Ombudsman Service to £350,000 has been condemned as ‘shocking’ by Royal London Director of Policy, Steve Webb.
In today’s Policy Statement, the FCA has been forced to admit that rather than 2,000 people potentially benefiting from the higher cap each year, only around 500 people are set to do so. And in the same document it admits that in a worst case scenario, hikes in Professional Indemnity Insurance costs for advisers could lead to around one thousand advice firms pulling out of the market for pension transfer advice. This will make it much harder for those considering a transfer to get advice.
Commenting, Steve Webb said:
“The FCA has been forced to admit that it got its numbers wrong and that just 500 people a year might benefit from this change. But the risk is that the insurance which advisers are obliged to buy will more than double in price and could drive up to a thousand firms out of the pension transfer advice market altogether. There is already clear evidence that PI insurers have been hiking premiums in anticipation of this policy change. Yet the FCA is pressing on regardless. This is a shocking decision. If far more members of the public are unable to access advice then this will be counter-productive and consumers will lose out as a result”
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About Royal London:
Royal London is the largest mutual life, pensions and investment company in the UK, with funds under management of £117 billion, 8.8 million policies in force and 3,745 employees. Figures quoted are as at 30 June 2018.