The Financial Conduct Authority (FCA) has today announced its decision to increase the Financial Ombudsman Service’s (FOS) compensation limit to £350,000, which has been condemned as “shocking” and “counter-productive” by Royal London director of policy Steve Webb.
The authority has been forced to admit that rather than 2,000 people potentially benefiting from the increased cap each year, only around 500 people are set to do so.
Furthermore, in the same document, the regulator admitted that “in a worst case scenario”, hikes in Professional Indemnity (PI) insurance costs for advisers could result in approximately one thousand advice firms pulling out of the market for pension transfer advice.
Commenting, Steve Webb said: “The FCA has been forced to admit that it got its numbers wrong and that just 500 people a year might benefit from this change. But the risk is that the insurance which advisers are obliged to buy will more than double in price and could drive up to a thousand firms out of the pension transfer advice market altogether.
“There is already clear evidence that PI insurers have been hiking premiums in anticipation of this policy change. Yet the FCA is pressing on regardless. This is a shocking decision. If far more members of the public are unable to access advice then this will be counter-productive and consumers will lose out as a result.”
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