PIA to raise pounds 15m for safety net
Your support helps us to tell the story
From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.
At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.
The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.
Your support makes all the difference.NIC CICUTTI
Radical plans to rescue the beleaguered Investors Compensation Scheme, the safety net for victims of fraud or bad advice, are set to be unveiled by a top financial regulator.
The Personal Investment Authority will call for an extra pounds 15m be raised from its members to help the compensation scheme in times of crisis.
The aim will be to prevent a repeat of last year's problems, where the Treasury was forced to step in and underwrite up to pounds 17m of payments only hours before the scheme ran out of cash.
The extra money, which is expected to be levied in three annual tranches, will be in addition to existing funds raised by the scheme in April each year.
Sources said the pounds 15m, once raised, could also be used to "smooth" yearly contributions to the ICS if any one annual bill is too large.
But the PIA's paper, to be published next week, is also believed to shelve proposals for a product levy, a small amount of money added to the cost of every policy sold, as too impractical to operate.
Despite protests from many financial advisers, who fear they could be left to foot the bill alone, the PIA will stand by its policy of refusing to use the money raised to pay compensation for pension mis-selling.
Garry Heath, chief executive of the IFA Association, the financial advisers' trade body, said: "We have suggested pre-funding the scheme by surrendering a proportion of our commission earnings, so this would appear to be close to our position.
"I am nervous, however, that they have not grasped the nettle of pension transfers yet."
Paul Smee, head of the ABI's life insurance section, said: "We will be looking at the proposals carefully.What we still need is a regulatory system that prevents the need for people to have to be paid compensation."
The PIA's consultation document follows mounting concern over funding of the compensation scheme.
At present, the scheme pays out to investors and then levies regulators for the amount.
The PIA, which usually meets the vast majority of each year's bill, does so by a system of cross-funding between members. But it was forced to suspend payments, triggering the Treasury's intervention, after being challenged in court by an insurer.
Its new proposals include using the same cross-funding formula to meet the maximum pounds 100m it is liable for in any one year, double the previous amount.
Join our commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies
Comments