Poor pension advice is continuing to dog the UK financial services sector, with the FSCS predicting a shortfall in the funds it needs to compensate those who receive bad or unsuitable advice.
In its December 2019 outlook, published on Tuesday, the Financial Services Compensation Scheme (FSCS) said: “We expect to raise a supplementary levy and forecast £46m ($61.3m, €55.1m) will be needed” from the life distribution, pensions and investment intermediation class.
This includes a contribution from providers.
“We have now seen an increase in expected compensation in this class of £44m (+23%) compared to the levy forecast,” it added.
“The main area of claims, £162m of total costs of £237m, is in relation to pension advice.
“We have experienced more complex and more expensive claims in this area, and this has increased the cost by £20m.”
The day before the FSCS released its outlook, the Financial Ombudsman Service published a consultation on its budget and plans for 2020.
Interestingly, under the investments and pensions section, its forecast suggests that it will see fewer complaints under this category in 2019/20 than its initial plans and budget consultation suggested.
It does state, however that there has been a rise in self-invested personal pension (Sipp) complaints, including disputes over due diligence.
“Reflecting the broad trend towards complexity that we’re seeing across out casework, many of these complaints are hard-fought, subject to ongoing legal action and, in some cases, involving firms that have gone into liquidation.”
These factors “create challenges around reaching a quick resolution”, the FOS said.
“We’re currently upholding around six-in-10 complaints involving Sipps: far higher than the average across our casework.”
International Adviser reached out to both the FSCS and the FOS to ask why there is this apparent discrepancy between the two organisations’ expectations on the level of pension complaints.
No response was received ahead of publication.