Savers and investors face higher product and advice charges this year as a result of a rash of expensive scandals and company failures.
The compensation bill for victims of poor advice and mis-sold financial products has shot up to more than £1 billion.
Experts warn that the eye-watering bill is likely to be passed on to consumers in the form of higher costs for financial advice and products such as investment funds and pensions.
The Financial Services Compensation Scheme compensates investors and savers if their bank, building society or investment platform goes bust
The Financial Services Compensation Scheme (FSCS), the compensation fund of last resort, has set its budget for the year ahead at more than £1billion – up from £700million last year.
A large chunk of the money will be compensation paid following the collapse of mini-bond issuer London Capital & Finance in 2019, which left investors with losses totalling £236 million.
The cost of claims for poor pension advice is predicted to total £256 million.
Claims from victims of failed self-invested personal pension operators are forecast to rise by 89 per cent to £336million.
More firms are also predicted to collapse due to the economic impact of the pandemic. Chief executive of the FSCS, Caroline Rainbird, told The Mail on Sunday: ‘This level of compensation is too high for all sorts of reasons.
‘For every penny of compensation paid, that is a consumer who has had a really unfortunate set of circumstances. The bill also needs to be funded by the industry, and it’s a large amount to pay.’
PIMFA, the trade association for the wealth management and financial advice industry, believes it is unfair to ask well-run firms to pay for the wrongdoing of others.
Tim Fassam, director of government relations and policy, says: ‘Reform of the compensation scheme is urgent but will take time. The Government must find other sources of revenue to cover these extreme costs resulting from financial failure.’
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