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&#39Simpler&#39 review test may not save IFAs cash

Aifa has warned IFAs that the FSA simplified review test may not save them money after all.

It has scrutinised the full details of the new test and found it is heavily skewed in favour of the consumer.

The association says many cases may fail the simplified test, forcing the IFA to have to pay out more money to carry out the standard test.

Cases that pass the simplified tests could lead to savings of £300 a case for IFAs as the new tests makes the calculations of transfer values much more simpler. IFAs should be able to conduct these calculations in house rather than outsourcing to actuaries.

But the FSA has weighted the pass mark on the simplified test towards the consumer. An adjustment has been incorporated and around 19 per cent, or one in five cases, that would pass the standard test will fail the simple version.

If the case fails the simple test by a narrow margin, the IFA must revert to using the standard test. But this means advisers will have to pay actuarial fees and incur extra work, making savings unlikely.

Aifa is disappointed the test has come so long after the optional compliance test. Most IFAs have already completed phase two and so it is only IFAs that have outstanding cases.

Aifa director of policy and technical services Fay Goddard says: “Any savings will depend on whether the IFA can do the calculations in house and how many marginal results they have. They have to remember this is only one part of the review and still have to continue with the rest of the process.”

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