Trade association PIMFA has called for an urgent review of the Financial Services Compensation Scheme (FSCS), following yet another announcement of an interim levy that the industry will be expected to fund.
The levy, which is £69m, is in part due to higher than expected pension transfer claims. The FSCS had already announced that its actual costs had increased by almost £70m, increasing to £407m from its forecast of £336m.
The association has expressed its concern that the reason for these claims is not being tackled. It that it is not clear if the FSCS follows through on getting money it pays out back from PI providers, who covered the firms who ceased to trade, which caused claims to be referred to the FSCS.
PIMFA highlighted that this is creating an untenable position for firms, resulting in them not being able to effectively plan and budget for their future.
Commenting, PIMFA CEO Liz Field said: “Unexpected levy increases of this magnitude cannot be part of a long-term sustainable funding option for the FSCS.
“Member firms need to be able to plan their own finances and be confident that the relevant regulator is taking pro-active steps to address the root causes of increased FSCS claims not just the symptoms.
"We know the levy is complicated, but the industry needs to work with FSCS on a model that works for firms.
“Our member firms fund the FSCS through their levy and should reasonably have confidence that the burden of costs from claims settled by the FSCS, whether they relate to defaulting firms or unsuitable advice, are recouped from the PI with the funds recouped used to reduce the financial burden increasing FSCS levies place on member firms. We need this situation clarified.”