The FSA says it will not recommend changes to current limits on compensation imposed through the Financial Services Compensation Scheme.
In its consultation paper 05/15 Review of Compensation Scheme and Ombudsman Service limits and miscellaneous amendments to the Compensation sourcebook – the FSA notes that:
- most claims or complaints are still well below the current maximum limits;
- there is no evidence that consumer behaviour and market confidence are being significantly affected by current limits;
- FSCS limits significantly exceed EU minimum limits (currently €20,000) for deposits and investments;
- FSCS limits are also generally higher than in other EU member states and other major world economies, with the exception of deposits.
"There is no evidence of significant or widespread consumer detriment, or distortions to consumer behaviour, either now or in the immediate future, that would justify recommending changing the limits," the review publication states.
The consultation closes on 31 March next year, although the regulator does say it will maintain an ongoing review regime on compensation limits. The FSA admits there “is a very wide range of views” on the limits.
Its own Consumer Panel felt there should be no upper limits on compensation given the increasing responsibility for financial decisions expected of consumers. Industry felt, on the basis of experiences since N2, that the existing limits should not be changed. Current limits have remained unchanged since December 2001, when the FSCS and the FOS started operating.
A separate review of the Financial Ombudsman Service in relation to compensation will be carried out mid-way through 2006 with regard to provisions of MiFID, the Markets in Financial Instruments Directive. “including which consumers are eligible to complain to the FOS,” the FSA states.
- Investments 100% of first £30,000, 90% of next £20,000 Maximum £48,000
- Deposits 100% of first £2,000 90% of next £33,000 Maximum £31,700
- Insurance (compulsory) Unlimited 100% of claim
- Insurance (non-compulsory) Unlimited 100% of first £2,000 90% of remainder
- Mortgage advice & arranging 100% of first £30,000 90% of next £20,000 Maximum £48,000
- Advising & arranging general insurance: - compulsory 100% of claim - non-compulsory 100% of first £2,000 90% of remainder
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Jonathan Boyd on 020 7484 9769 or email [email protected].IFAonline
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