The FSA has published proposals to alter the funding arrangements for the Financial Services Compensation Scheme from April 2009.
The plans include:
dividing the market into five classes :
- LIfe & Pensions
- General Insurance
- Investments
- Deposits
- Home Finance
Each class would then be subdivided between provision (Product Providers) and Intermediation (Brokers / Direct distribution)
The model will introduce a 'widening circle' model of funding under which the first tranche of compensation costs emerging from a particular sub-class of firms is borne by that sub-class alone, while higher costs are shared more widely.
expanding the overall financial capacity of the scheme - up to a maximum of £4.4 billion per annum
For IFA's the basis of the funding arrangements will move from the number of Approved Persons (Advisers) to annual eligible income.
