Adviser trade body Pimfa has called on the Financial Services Compensation Scheme to do more to ensure professional indemnity insurance providers pay up when firms collapse.
Pimfa is calling for a review of how funds are recouped from PII in light of another propsed interim levy from the FSCS this week of £69m.
The £69m deficit for 2018 is expected despite the lifeboat fund’s previous additional £75m levy imposed on life and pensions advisers in April.
Pimfa is calling for a different funding mechanism on behalf of advice firms following the release of the FSCS’s November outlook today in which plans for the levy were set out.
FSCS chief executive Mark Neale is pointing the finger at poor advice on defined benefit transfers leading to increases in Sipp and other pension failures.
Chief executive Liz Field says the FSCS should been made to clarify where money from PI insurance – which should help offset the costs of the scehem – goes, however.
She says: “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 the claims to end up with the FSCS.
“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.
“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 claims and not just the symptoms.”