The compensation body announced on Thursday that it would seek to raise an extra £24m in the months up to June 2018 after misjudging how much cash was needed to plug an increase in Sipp-related claims.
The additional levy highlighted the “disgraceful injustice” of the FSCS’ funding model according to Ken Davy, chairman of the SimplyBiz Group, which offers compliance support to advisory firms.
He said: “Thousands of firms who have never been involved in this type of business or had any way of being aware of, or stopping, the firms that have caused the losses are faced with picking up the bill.
“This totally arbitrary and ridiculous system which virtually everyone recognises is a broken model must be radically changed by the FCA without any further delay.”
In an outlook published on Thursday, FSCS chief executive Mark Neale confirmed the cost of the supplementary levy would fall on the retail space.
After raising an initial £100m to meet the expected cost of Sipp-related compensation claims, Neale said the FSCS needs to raise additional cash to cover claims being submitted to life and pension advisers. Claims are predicted to hit £146m in total this year.
Timeline changes
The Financial Conduct Authority has also released a consultation in partnership with the FSCS to ask the industry its thoughts on aligning the current levy year with the financial year.
In his outlook, Neale said: “This is a welcome tidying up, making FSCS’s levy year clearer to understand, but it does mean that FSCS must necessarily, to achieve alignment treat either 2017/18 or 2018/19 as a nine-month year. That in turn raises the question of whether, in a nine-month year, annual limits should be abated commensurately.”
