TMA Mortgage Club is calling on brokers to respond to an FCA consultation paper on how the current Financial Services Compensation Scheme is funded and to ask that the ‘fund of last resort’ reconsider the policy that sees mortgage brokers pay for bad pension advice.
Brokers have until the 31 March to respond to the paper, which outlines three future alternatives to the way financial advisers, including mortgage brokers, pay into the levy.
Currently, the FSCS levy puts life and pensions in the same class, meaning that brokers who solely advise on mortgage protection are paying to insure pensions products, including self-invested personal pensions (SIPPs).
TMA mortgage club director David Copland (pictured) says: “Asking mortgage and protection brokers to pay for poor guidance on pensions is wrong. Most of our advisers are not licenced to sell pensions, but are currently paying for bad advice on pension products. Simply put, protection advisers should not be paying into a dual life and pensions pot.
“Whilst the FCA has recognised there is a problem, they have not recognised that these pots must be separated. This has to change, and brokers must take action. That’s why we are campaigning for brokers across the country to encourage the regulator to think again.”
TMA believes the FCA should replace compensation fees with a product levy, weighted against the riskiness of the product being sold. It says the money should then be paid into a new pot so that when a claim is made, and if the advising firm no longer exists, compensation can be taken from this new fund.
TMA is calling for the FCA to separate the life and pensions pot “at the very least”, saying that the vast majority of mortgage brokers who are paying into life and pensions pot don’t advise on pensions, yet the number of claims from the life and pensions pot continues to rise.
According to FSCS figures, last year, the life and pensions pot exceeded its budget by £10m because of claims made following bad advice about SIPPs. The FSCS plans to levy a further £171m for the life and pension intermediation sector in 2017/18 due to more compensation claims for SIPPS; TMA says the scheme will likely look for contributions from all firms.
Brokers can respond on the FCA website and answer Q14: What are your views on the different funding classes we have set out here? Do you have any alternative proposals? Here: https://www.fca.org.uk/cp16-42-response-form