The Financial Services Compensation Scheme (FSCS) has spent £19m appointing financial services network Deloitte to help with claims handling services.
The lifeboat fund said chose to work with Deloitte because "it is the only firm in the market that has the capability, expertise and sufficiently experienced staff necessary to meet FSCS requirements." The contract is set to end in 2023.
The FSCS considered no provider other than Deloitte has the required specialist knowledge, skills, expertise and sufficiently experienced staff to deliver the services to meet the FSCS's requirements.
In 2018 the FSCS appointed a "transformational partner" for its claims processing services, however it identified it now requires specific support in processing some of its most complex claims.
Deloitte will help to evidence check and gather information from third parties such as claims management companies and regulators. It will also determine the eligibility of the customer, validity of their claim and complete the "quantification of compensation".
Ian Else, who is founder and financial planner at 4 Financial Planner, said: "There will always be concerns when such critical function is outsourced. However, if it brings some much needed expertise to the task and it's run properly, I would hope it will improve outcomes, although there's still the Financial Ombudsman Service to contend with.
"I hope the £19m isn't going to be raised by a further level of already heavily penalised good advisers," he added.
Effect on levy
Bamford Media CEO Martin Bamford said: "The FSCS has struggled for years due to handling payment protection insurance mis-selling claims.
"With the likelihood of more defined benefit pension transfer claims coming through the pipeline, it makes sense to award a claims handing contract to a third party with sufficient capacity, so consumers are not left waiting for resolution.
However, the CEO warned the move could see advisers shouldering a greater FSCS-related cost at a time when many were already unhappy with levy fees: "Part of our FSCS levy each year goes towards the administrative and running costs of the FSCS, so using a commercial provider will undoubtedly see this element of costs ramp up, at a time when financial planners are already struggling with the burden." The lifeboat fund must do everything it can to keep costs under control, he added.
The FSCS has been criticised recently over the rising costs of its levy. Advisers will face higher levy bills once again this year as the lifeboat fund is set to raise its overall levy to £635m for 2020/21, with advisers set to be collectively billed £213m. Many advisers and other members of the sector have voiced their concerns with the rising levy.
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