The Financial Services Compensation Scheme estimates that £70mn in compensation is "lost" due to the fact its limit for pay outs is too low.
Speaking at the FTAdviser Financial Advice Forum this morning (September 28), Lila Pleban, chief communications officer at the FSCS, said the FCA was looking into increasing this limit - which is currently set at £85,000.
Pleban said: "Our compensation limit has not moved for years and years and we see a lot of customers with pensions in excess of £85,000 and a lot of them are close to retirement so have no chance of making it back.
"We estimate there is £70mn of uncompensated loss. We know that's on the agenda for the FCA to look at."
Pleban highlighted there was a discrepancy between the FSCS's compensation limit and the Financial Ombudsman Service's compensation limit which sits at £415,000 for complaints referred on or after April 1, 2023 about acts or omissions by firms on or after April 1, 2019.
Pleban estimated that 70 per cent of claims to the FSCS were related to poor advice.
Addressing the issue of the consumer duty, which came into effect earlier this year, Pleban said it was unlikely this would reduce the levy by eliminating poor conduct in the near future.
She said: "We do anticipate there will be an impact [on the levy] because 70 per cent of our claims are from bad advice. But they tend to come up to 20 years after the advice was given so that effect will be a little bit slower."
Attendees heard how the FSCS wants to "operate as effectively as it can, as efficiently as it can", according to Pleban.
To do this, she said the FSCS was continuing to invest in its technology to enable it to go through the due process as quickly as it can to ensure that consumers are protected
Pleban said the FSCS was also keeping an eye on the potential changes to the advice-guidance boundary.
She said: "Financial literacy in this country is very, very low and we believe the role of financial advisers is really, really important.
"Everyone should have access to good advice and there is a gap there. With technology there is an opportunity for that boundary to be looked at and hopefully that will be a win for everyone."
damian.fantato@ft.com
