PIMFA Brands FSCS Indicative Levy Announcement of £635 million as Totally Unsustainable
Thursday 16 January 2020
Reacting to FSCS announcement of a budgeted levy of £635 million, PIMFA, the UK’s trade body for the personal investment services and financial advice profession, has said that yet again, the FSCS compensation cost is at an all-time high and the cost burden falling upon their member firms is totally unsustainable. Compensation cost is a material item for all firms, large and small, and is ultimately borne by the consumers of firms whose activities do not give rise to consumer detriment.
In a recent member survey conducted by PIMFA, it was revealed that participant firms reported the range of FSCS as a proportion of turnover between 1% and 10%. The FSCS bill showed as an increase of 200% for some respondents and was a 52% increase for financial advice firm respondents. As a proportion of their overall regulatory bill, 86% of large full-service wealth managers participants saw an increase of 57% from last year, and double the amount of stockbrokers are paying above £1 million.
PIMFA CEO Liz Field said:
“The year on year excessive level of compensation cost is such that we call upon the FCA Board to carefully consider whether FCA’s existing supervisory regime is fit for purpose, and for HMT to fundamentally review the purpose of the levy system and its impact on good firms. The system is not working and fundamentally impacts on firm’s ability to invest in their businesses and enhance services to clients.
Our member firms do not advocate a no default supervisory regime and recognise the benefits to consumer confidence that FSCS provides, however, there is a failure in the system and these costs are simply not sustainable. Our research shows that the bills are already such that are firms are at breaking point.”
PIMFA also highlighted that FSCS is budgeting for a levy of £635 million for 2020/21 compared to the final levy of £548 million for 2019/20. The Annual Funding requirement for FCA in 2019/20 is £558.5 million so, broadly, the cost of running the FCA is the same as the compensation costs paid by firms.
Notes for Editors:
PIMFA member firms predominantly fall within the ‘Life Distribution, Pensions and Investment Intermediation’ class – where the budgeted costs are £213 million 2020/21 compared to a final levy of £189 million 2091/20 – and the ‘Investment Provision’ – where the budgeted costs are £200 million 2020/21 compared to a final levy of £139 million 2091/20.
The final levy figures for 2019/20 include an additional levy of £50 million and PIMFA understand firms will shortly be receiving invoices for the additional levy to be paid towards the end of February.
About PIMFA – the Personal Investment Management & Financial Advice Association
- PIMFA is the leading trade association for firms that provide investment management and financial advice to everyone from individuals and families to charities, pension funds, trusts and companies.
- PIMFA represents both full and associate member firms. Full members provide a range of financial solutions including financial advice, portfolio management, as well as investment and execution services. They assist everyone from individuals and families, to charities and pension funds, all the way to trusts and companies. Associate members provide professional services to the PIMFA community.
- PIMFA leads the debate on policy and regulatory recommendations to ensure that the UK remains a global centre of excellence in the wealth management, investment advice and financial planning arena. Our mission is to create an optimal operating environment so that its member firms can focus on delivering the best service to clients, providing responsible stewardship for their long-term savings and investments.
- PIMFA was created in 2017 as the outcome of a merger between the Association of Professional Financial Advisers (APFA) and the Wealth Management Association (WMA) with a history as a trade association since 1991 – read more.
- Further information can be found at pimfa.co.uk
- To become a member of PIMFA for access to training, benefits and discounts, please visit https://www.pimfa.co.uk/become-a-member or contact us directly at [email protected]
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