CP17/36: Reviewing the funding of the Financial Services Compensation Scheme (FSCS): feedback from CP16/42, final rules, and new proposals for consultation

Open consultation: CP16/42
Consultation closed
CP17/36: Final rules and further consultation
Consultation closed
Policy Statement
Q2 2018
Q2 2018

We are consulting on proposals to change how the FSCS is funded and to increase the protection it provides to consumers.

Show CP17/36 (PDF)

This consultation paper follows CP16/42 (PDF) published in December 2016 which sought views on how FSCS funding could be reformed. Our ongoing review seeks to ensure the FSCS continues to provide the right protections, works effectively and is funded fairly. Following the feedback received we are now consulting on the following proposals:

  • merging the Life and Pensions and Investment Intermediation funding classes
  • requiring product providers to contribute around 25% of the compensation costs which fall to the intermediation classes
  • moving pure protection intermediation from the Life and Pensions funding class to the General Insurance Distribution class

We are also consulting on increasing the FSCS compensation limit for investment provision, investment intermediation, home finance and debt management claims to £85,000.

This paper also contains the final rules for changes to FSCS funding which were consulted on in December 2016.  This includes:

  • introducing FSCS coverage for debt management firms
  • extending coverage in respect of fund management
  • applying FSCS protection to advice and intermediation of structured deposits
  • requiring the Society of Lloyds to contribute to  the retail pool
  • introducing additional reporting requirements which will potentially enable the FCA to introduce risk-based levies in the future
  • amending payment arrangements

We are also seeking views on other options for reducing harm to consumers. These options are intended to give firms incentives not to carry out activities which have led to FSCS claims in recent years, and also to reduce the value of claims the FSCS has to meet. We are considering requiring certain Personal Investment Firms (PIFs) – particularly those with exclusions on their Professional Indemnity Insurance (PII) policy - to pay money into a trust account or purchase a bond that would ensure more claims are paid for by firms or their insurers.

Who this applies to 

This consultation paper will be of interest to all firms, whether they are current or potential contributors to FSCS funding, and to consumers, or consumer groups.

Next steps

This consultation is now closed. We expect to publish a Policy Statement in the first half of 2018. It will contain:

  • responses to the feedback we receive
  • made rules for the areas consulted on in this paper

Rules consulted on in the paper will be made in time for implementation in the 2019/20 financial year.