Mortgage brokers who advise on life assurance or protection have been warned the drop in FSCS fees for home finance providers won’t reduce the bill for them.
Robert Sinclair, chief executive of the Association of Mortgage Intermediaries, said the reduction of Financial Services Compensation Scheme fees for the next year from £10m to £6m was effectively immaterial and brokers would continue to pay over the odds.
Rather than charge mortgage brokers £10m in the coming year, the FSCS has agreed to a £6m contribution, which is nevertheless a rise from last year’s fees of £5m.
He said: “The problem is that most mortgage brokers also advise on life cover and that means they end up paying around half of the FSCS bill for the life and pensions advisers.
“That means that next year mortgage intermediaries are facing FSCS fees of around £45m on life and pensions plus their share of the £6m on mortgage advice.”
Last year the FSCS fees for life and pensions was £100m. This year the bill has dropped to £90m which is up from a forecast of £80m.
The FSCS said this was down to the higher average cost of claims arising from advice about self-invested personal pension investments.
Sinclair added: “This is completely unfair – mortgage and life advisers are footing the bill for poor advice on SIPPs and the industry is not remotely near the end of complaints over this.
“While the lower bill for home finance intermediaries is welcome, the overall cost for mortgage brokers won’t materially shift this year.”