SimplyBiz chairman Ken Davy (pictured) has criticised the Financial Services Compensation Scheme (FSCS) after it announced a levy hike of an additional £23.9m.
The lifeboat fund said it needed to raise the money from financial advisers and the wider industry though an interim levy, after making a £5m loss in 2017/2018.
This was due to higher than expected self-invested personal pensions claims (Sipp) claims, which can often be related to the misspelling of high-risk products. Another reason was carrying forward less money than expected from 2016/2017.
Ken Davy, chairman, SimplyBiz Group, said: “This additional levy highlights once again the disgraceful injustice of the current funding method of the FSCS.
“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!!”
The FSCS had already reached £100m in April, which is the annual levy limit in the life and pensions intermediary class.
Despite this the FOS will not increase levies against mortgage brokers.
An FSCS statement said: “We have revised our forecasted compensation costs in this class upwards since the original levy, from £13m to £18m.
“This is largely because of an increase in uphold rates, which have risen from 29% to 43% since the start of the year, as well as a slight increase in the rate claims are processed.
“We are now forecasting a £5m deficit at the end of the levy year, but this would be too small to consider a supplementary levy under our current policy.”