TMA Mortgage Club has urged brokers to respond to an FCA consultation paper on how the Financial Services Compensation Scheme (FSCS) is funded.
Brokers have until the 31 March to respond to the paper which outlines three future alternatives to the way financial advisers pay into the levy.
David Copland (pictured), director of TMA Mortgage Club, said: “Asking mortgage and protection brokers to pay for poor guidance on pensions is wrong.
“Most of our advisers are not licenced to sell pensions, but are currently paying for bad advice on pension products. Simply put, protection advisers should not be paying into a dual life and pensions pot.”
Currently the FSCS levy puts life and pensions in the same class meaning that brokers who solely advise on mortgage protection are paying to insure pensions products – including self-invested personal pensions (SIPPs).
TMA believes the FCA should replace compensation fees with a product levy, weighted against the riskiness of the product being sold.
This money should then be paid into a new pot so that when a claim is made and if the advising firm no longer exists, compensation can be taken from this new fund according to TMA.
Copland added: “Whilst the FCA has recognised there is a problem, they have not recognised that these pots must be separated.
“This has to change, and brokers must take action. That’s why we are campaigning for brokers across the country to encourage the regulator to think again.”
The FCA’s current proposed changes to the levy do not separate life and pension pots.
Last year the life and pensions pot exceeded its budget by £10m because of claims made following bad advice about self-invested personal pensions.