In a consultation paper which came out yesterday, the FCA said it would half the amount financial advisers would have to pay because the fee was “disproportionate to the benefit that they are likely to receive” compared to firms such as life insurers and portfolio managers.
The UK finance authority suggested introducing five retirement guidance fee-blocks identifying the businesses that will contribute to collection of the levy. These include deposit acceptors, life insurers, portfolio managers, managers of investment funds and operators of collective investment or pension schemes, who will all pay 22% of the levy, while advisory arrangers, dealers or brokers pay 12%.
Financial advisers who have an income of less than £100,000 will be exempt from paying.
The FCA said: “In our view, the key reason put forward for allocating less [to financial advisers] was that product providers are more likely to benefit as the monies released through pensions flexibility (if used for investment) will be distributed amongst them. The benefit was less clear in the case of financial advisers.
“We also consider, that selecting only these five fee-blocks enables the burden of the levy on firms to be more proportionate to the benefit generally expected to result from the provision of retirement guidance that the levy will fund.”
The new service aims to give people free and impartial advice on how to use their retirement savings in light of the new pension reforms which will be introduced in April 2015.
“Disappointing”
“I’m very pleased with this news,” said the director of Chapters Financial, Keith Churchouse. “With regulatory costs climbing all the time, any reduction is welcome.
“But I do think it’s turning into a political football and the non-trade publications are not helping the situation by calling it advice instead of guidance. The guidance guarantee will not provide solutions, but will present the options and then tell them to go and see an adviser.
“Therefore I think once the product is available to the public their expectations of what it will deliver will be disappointing.”
Toughen up
The regulator has also said it will toughen up on standards for monitoring and enforcing the guidance guarantee “to ensure that all those accessing the service get a consistent outcome”, and is planning a review of the policy next year.
Director of policy, risk and research at the FCA, Christopher Woolard, said: “It is important that people get support to enable them to make the right choices about what to do with their retirement fund.
“We want this to work well for consumers and the industry and I believe that the standards and rules we have published today strike that balance.
“They will give consumers confidence in the quality of the service they will receive and provide certainty to those tasked with delivering it from April next year.”
