FSCS Pays Out Over £370m this Year, Including for SIPP Compensation
As we prepare to say by to 2018, the Financial Services Compensation Scheme (FSCS) has reported that it has already spend over £372 million in settling compensation claims of those affected by the collapse of financial institutions. This cuts across the entire scope of the financial sector. At least 69,000 people have so far benefited from the intervention of the FSCS. This figure includes more than 10,000 people who were compensated when six key credit unions collapsed during the year.
They include 600 customers of the Polish Credit Union, which failed in July; the Kensington and Chelsea Credit union (Your Credit Union), which crashed in October; 5,000 members of the Essex Savers Credit Union, which fell in February; Harp Credit Union, which collapsed in September, and 1,250 customers of Dial-A-Cab, whose collapse occurred almost concurrently with that of Harp Credit Union. The FSCS offers protection of up to £85,000 saved with credit unions, banks or building societies.
Claims Against SIPP
FSCS also received compensation claims against three SIPP operators, related to mis sold pension issues. These were Stadia Trustees Limited, Brooklands Trustees Limited and Montpelier Pension, all of which were declared in default. There has been quite a worrying trend in SIPP failures. Close to a quarter of the claims settled by FSCS have been due to bad pensions advise. At least £112 million was used to correct matters.
It should be noted that pension freedoms present consumers with many options to choose from. However, this increases the risk of losing one’s savings in case of a default by the pension scheme. FSCS only intervenes in cases where authorised advisers are involved.
FSCS, together with the Danish Guarantee Fund, stepped in to secure thousands of motorists when Alpha Insurance was liquidated. Over 10,700 eligible customers received a replacement of their private motor insurance policies through alternative insurance agreed upon by FSCS and the Danish Guarantee Fund.
The Stock Market
FSCS proactively intervened when Beaufort Securities, a trusted stockbroker, collapsed earlier in the year. Of its 17,500 investors, 15,400 have already been reimbursed. The remaining cases are which a bit complex, and may take longer to settle. FSCS covers up to £50,000 of investment per person, ranging from claims of misrepresentation, negligence related to mis-selling of pensions, bad advice and poor management of investments.
The FSCS is the United Kingdom’s highest financial compensation scheme. It intervenes when banks, building societies or credit unions registered with FCA collapse. It covers up to £85,000 of client’s savings. The scheme also steps in when a financial institution fails to settle any claims against it by its customers. As such, it cushions customers from any losses they would have incurred. FSCS covers a wide range of financial products at zero cost. This it does with great swiftness, as long as all parties involved are on the same page.