Collegiate News

FSA leaving compensation limits unchanged

8 June 2006


Money Marketing-08-Jun-2006

Advisers and professional indemnity insurers have hailed the FSA's decision not to raise existing payout limits for the FSCS and the FOS.

Compensation and eligibility limits for the Financial Services Compensation Scheme and Financial Ombudsman Scheme will remain unchanged until at least 2009 when the next review takes place.  The FOS limit is currently £100,000 for all types of business while the FSCS limits depend on product type.


The FSA began its consultation before Christmas after its own review suggested that most claims were well below current payout limits and found no evidence that the limits were affecting consumer confidence.


The regulator also pointed out that the FSCS limits exceed EU minimum limits significantly and are generally higher than in other member state countries.


Aifa has welcomed the decision, claiming there was no justification for a rise in the limits, but the Financial Services Consumer Panel claims the move is bad news for consumers and says the FOS compensation limit, which was set in 1981, should have increased in line with inflation.


Collegiate managing director Tony Howe says consumers still have the protection of the courts for big payouts where cases of such magnitude can be given the scrutiny they deserve.


Howe says: "This is good news for advisers as there was real concern about the effect of any rise in limits on PI costs and the potential for advisers to be unprotected for claims over £100,000. The FOS justice might be all right for cheap and cheerful rulings but not for very big cases that should be decided in court."


Aifa director of public affairs Tracy Mullins says: "There was no justification in raising the levels of the limits and we submitted evidence to the FSA arguing this case, which the regulator seems to have agreed with."