Time to rethinkinvestor compensation

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The Independent Online
If you believe the Treasury, all those stories about looming insolvency for the Investors Compensation Scheme are a storm in a teacup. The problem would in any case go away if Sun Life's application for a judicial review is rejected by the courts. If the courts decide otherwise, some kind of temporary bridging arrangement can no doubt be put in place. By its own admission Sun Life doesn't want to destroy the scheme by challenging it in the courts; the idea is merely to ensure that contributions do not fall foul of the company's obligations to policyholders.

So if there is no real problem, why tinker with a system that has paid out pounds 80m since being set up in 1988? Well, here are a few good reasons. The scheme's upper limit of pounds 48,000is woefully inadequate. There are also doubts whether it is in a fit state to meet future obligations. Many of the independent financial advisers that fund it are throwing in the towel.The PIA should use the opportunity to rethink the scheme, perhaps by replacing the current system of levies on individual companies with an industry-wide product levy.

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