Their comments come as the FSCS forecasts it will need more than £1bn from the industry to cover the cost of compensation for the coming year, up 48 per cent year-on-year and maxing out the advice sector’s limit for the second year running.
Tim Fassam, director of government relations and policy at PIMFA, said in any other sector, such a forecast would be the focus of a national scandal.
He added: “We cannot continue to normalise this level of loss, accepting that the compensation scheme will hopefully pick things up on the other side.
“Every single person who has had to claim on the FSCS has received a poor outcome that it would be better to avoid. Reform is now urgent, but will take time.”
The City watchdog has already made some moves to rethink how the lifeboat scheme is funded, saying in a Call for Input in September that it wanted to consider how it could have a system where “firms which cause harm end up paying more” of the FSCS’s costs.
The regulator reiterated it did not want to conduct a “fundamental review” of the structure, but said it was aiming for a “more preventative approach”, with options including a renewed attempt to pinpoint or penalise potential wrongdoers before claims arrived at the FSCS.
But newly appointed chief executive of the regulator, Nikhil Rathi, later told MPs that it would take "two or three years" to abate the industry levy.
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