FSA attacked over with-profits compensation backtrack

FSA proposals which would allow old mis-selling costs to be paid for out of with-profits policyholders funds were branded "a backward step" today, just three days before the end of a consultation on the plans.

The Financial Services Consumer Panel (FSCP) says the FSA has gone back on its original proposals and now wants to let shareholders "off the hook" for previous corporate mismanagement.

In consultation paper CP09/9, published in February, the FSA said policyholders will still have to continue to pay costs for past mis-selling and only mis-selling which occurs in the future will become the responsibility of shareholders.

According to the FSCP, this represents a u-turn since paper CP08/11, published last year, which proposed no mis-selling costs could be taken out of with-profit funds regardless of when the mis-selling occurred.

Consultation on CP09/9 closes on 22 May.

"The FSA's latest consultation proposals represent a backward step for policyholders," FSCP acting chairman Adam Phillips says.

"We supported CP08/11, believing it is only fair the business itself should bear costs relating to mismanagement. Now the FSA is proposing to let shareholders off the hook for corporate mismanagement in the past."

The FSA established the independent FSCP in December 1998 to advise its Board on the interests and concerns of consumers and to report on the FSA's performance in meeting its objectives. It has statutory status.

scott.sinclair@incisivemedia.com