The FSA's decision to maintain the Financial Services Compensation Scheme and Financial Ombudsman Service compensation limits has been criticised by the financial services consumer watchdog.
The Financial Services Consumer Panel said there were "strong arguments" for the removal of limits on FSCS and FOS payments.
The current compensation limits for FSCS claims are: for compulsory insurance classes, 100% of the claim; and for non-compulsory classes, 100% of the first £2,000 of the claim and 90% of the remainder. The limit for FOS awards is £100,000.
Panel chairman John Howard said: "We are particularly disappointed that the FSA has decided not only to retain a cap on payments, but also to reject our recommendations that there should be an immediate increase in limits to make up for the effect of inflation."
Howard also criticised the FSA's decision to maintain the 90% limit on claims relating to non-compulsory classes of insurance. He rejected the FSA's arguments that this encouraged consumers to consider carefully whom they deal with. "Consumers are not in position to make judgments on the financial soundness of firms," he said.
The FSA said its decision to maintain the compensation limits followed a consultation in which the majority of respondents supported its proposal for no change to the limits. The regulator said it planned to review the compensation and eligibility limits again in 2009.
