The compensation payment limits for the Financial Services Compensation Scheme (FSCS) and the Financial Ombudsman Service (Fos) will remain at their existing levels, the FSA has confirmed.
The confirmation follows a consultation by the Financial Services Authority (FSA) at the end of last year in which the majority of respondents supported the FSA’s proposal for keeping the limits at their current levels.
The recommendation was based on a review carried out during 2005, which found:
- Most claims or complaints are still well below the current maximum limits;
- There is no evidence consumer behaviour and market confidence are being significantly affected by current limits;
- FSCS limits significantly exceed EU minimum limits (currently 20,000 euros) for deposits and investments; and
- FSCS limits are generally higher than in other EU member states.
The current limits have been in force since the FSCS and the Fos started operating in December 2001 under the Financial Services and Markets Act (FSMA) 2000.
The maximum level of compensation the FSCS can pay in respect of claims against investment and mortgage advice firms is £48,000, comprising 100% of the first £30,000 of the claim and 90% of the next £20,000.
The overall monetary limit for Fos awards is £100,000 for all types of business.
Tracey Mullins, director of public affairs at the Association of Independent Financial Advisers (Aifa), says the organisation is happy with the outcome and she believes the industry has done well to ensure the limits remain at their current levels.
She adds: "In our submission to the consultation paper we said there was no justification in raising the limits because all claims are well within the limits set."
The FSA plans to review the limits again in 2009.
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 Emily Perryman on 020 7968 4554 or email [email protected].IFAonline
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