The Financial Services Compensation Scheme (FSCS) has welcomed the review of the compensation limits for pension claims, warning that “far too many customers” are losing more money from their pensions than the FSCS is able to return.

Reflecting on the Financial Conduct Authority’s (FCA) Compensation Framework Review, FSCS chief executive, Caroline Rainbird, warned that the current £85,000 limit is too restrictive, revealing that since the start of the financial year in April 2022, more than £68m has been lost by customers with valid claims whose losses were above FSCS limits.

She continued: “A review of the compensation limit for pensions claims is something we called for, and I am pleased that this will be looked at next year.

“Sadly, many will continue to lose out whilst the limit stays as it is. FSCS believes that reviewing the limit would benefit both consumers and industry, as enabling greater confidence and trust in the system, through reducing the harm and loss when things go wrong, will ultimately drive more investment in the long run.”

Alongside this, Rainbird welcomed the review in-tandem of the levy limits for each funding class, and the suggestion to introduce periodic reviews for both compensation and class limits, acknowledging that the classes as they are “do cause frustration, especially when a retail pool contribution is required”.

Rainbird stressed that the FSCS is also continuing its work to support consumers, focusing much of its awareness activity in areas such as pensions and investments, where awareness of protection is low, but the harm experienced is great.

"We can pivot quickly with our communications activity, particularly on social media, so we have also been able to respond to emerging concerns about the cost of living and specific products through monitoring consumer behaviour and sentiment, surfacing the most relevant information at the right time," she added.

Rainbird also confirmed that the FSCS has been working jointly with the FCA on a new series of research, which aims to fully understand how FSCS protection underpins consumer confidence and trust in the industry, in an effort to ensure that FSCS protection remains appropriate in the future.

More broadly, Rainbird noted tht the recent ‘Edinburgh Reforms’ outlined by the government, alongside the Financial Services and Markets Bill, present a wide-ranging set of changes to key regulation, as well as giving an opportunity to "really accelerate change and adapt our regulatory framework so that growth is facilitated".

She stated: "These reforms pave the way for a significant amount of potential regulatory change, and we look forward to working with the government, regulatory bodies, and industry in playing our role to support this important work.

"Responding to advancing technology, encouraging innovation and growth, and addressing legacy issues are all vital – whilst maintaining the stability that well-grounded regulation brings."

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