Comment: Time for a separation of powers with FSCS


The FCA must split the life and pension pot; it is unfair that mortgage brokers have to pay to compensate pensions

The Financial Services Compensation Scheme life and pensions levy is to mortgage intermediaries what last year’s cruciate ligament knee injury was to West Brom footballer Chris Brunt: crippling and unfair. However, just as Brunt has fought back this season, we can fight the levy.

Levity aside, the FCA is consulting the industry on revising the way the compensation scheme is funded. The fact is, mortgage and protection advisers are currently paying for poor advice on pension products by firms that no longer exist.

What is more, the regulator expects these costs to rise. In fact, it plans to levy a further £171m for the life and pension intermediation sector in 2017/18. That is why we recently called on brokers to respond to the consultation, and to Q14 in particular, which asks: ‘What are your views on the different funding classes we have set out here? Do you have any alternative proposals?’

We think the best alternative is to place a product levy on each product relative to its risk. Adding an extra cost to individual products is not only fairer – as you are insuring your own risk – it is also more transparent for the consumer. They see the cost up front and are not later hit by indirect service charges that inevitably filter through from providers and brokers.

The crux of the issue, though, is that the FCA must at least separate the life and pension pot; it is simply unfair that mortgage brokers have to pay to compensate pensions.

The regulator is giving us an opportunity to respond and I hope we take it. I expect to see column inches filled with articles about the levy until the 31 March deadline has passed.

David Copland is director of TMA Mortgage Club