FSCS Funding class structure from April 2019
In recent years, the industry has expressed concern about the volatility of FSCS levies and the impact of this on intermediaries. The Financial Advice Market Review of 2016 looked at the variability of FSCS levies and suggested that FSCS funding should be reviewed to reduce volatility in FSCS levies.
Following the Financial Advice Market Review, the Financial Conduct Authority carried out a review into FSCS funding in 2016, resulting in a new funding model for FSCS. The new model, along with most of the changes, comes into effect on 1 April 2019.
The new funding arrangements merge the Life and Pension intermediation and Investment Intermediation funding classes into one, to reduce volatility. Product providers will also contribute around 25 per cent of the compensation costs which fall to the intermediation classes. Provider contributions will start from the first pound. The use of the retail pool will also be expanded to include Investment Providers.
New class structure (April 2019)
In addition, some of the FSCS limits will change from 1 April 2019, as outlined below:
|Class||Current limit||New limit|
|Life & pensions intermediation||£50000||£85000|
|Home finace intermediation||£50000||£85000|
|Long term care insurance||£50000||100% of the claim|
The Financial Conduct Authority has recently closed a consultation paper relating to the Professional Indemnity Insurance (PII) requirements for Personal Investment Firms, which were looked at under the funding review, and has just published its final policy statement. The Financial Conduct Authority also expects to consider the case for consulting on risk-based levies for Financial Conduct Authority classes in 2019.