The Financial Services Compensation Scheme's (FSCS) 2018/19 levy, which is due to be published in April, will reflect the growth of claims around DB transfer advice, Mark Neale has said.
The lifeboat fund's chief executive revealed the FSCS was now beginning to receive claims resulting from "bad advice" to cash in defined benefit (DB) pensions. He said the scheme's 2018/19 levies, paid by financial advice firms and other financial services businesses, would reflect the incoming claims.
The news comes after the FSCS issued an additional £24m interim levy for life and pensions advisers in January, due to rising numbers of self-invested personal pension (SIPP) related claims in 2017/18.
It forecast a total levy of £336m for the shortened 2018/19 levy year in January, although it is not yet clear whether Neale's latest comments are preparing firms for that sum to be inflated when it confirms the levy in April.
The forecast levy for the 'life and pensions intermediary' funding class was £87m, exceeding the £75m class limit, which was a quarter (25%) less than the usual £100m because of the shortened nine-month levy year.
While claims against pension advisers had been rising for some time, Neale said, these had mostly related to bad advice around the transfer of savings into SIPPs "to hold risky and illiquid assets".
In January, the FSCS declared three SIPP providers in default due to "serious due diligence failures".
'Retirement saving is different'
"All this leads me to conclude that, from the point of view of FSCS protection, retirement saving is different," Neale said.
"If you make a mistake investing [pension] savings, or are badly advised, you run the risk that your income in retirement will be badly depleted. There will then be little that you can do about it.
"So decisions about retirement savings carry risk but, increasingly, they're decisions that people are making for themselves as a result of pension freedom in 2015."
He said the time had come for this reform but people still needed help with financial decisions.
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