Advisers could pay 30 per cent of the total Budget guidance levy under proposals set out by the FCA today.
The regulator says advice firms who come under the FCA’s A13 fee block and have annual income of more than £100,000 will contribute to the levy. Small firms which only pay the minimum regulatory fee, estimated at 41 per cent of advice firms, will be exempt.
The FCA is consulting on standards for the Budget guidance designed to support the Government’s flagship pension freedoms policy, and proposals for collecting the levy which will fund the service.
The service was initially due to be funded through a duty on providers and trust-based pension schemes. But earlier today it was revealed this would be extended to all firms deemed to benefit from the service.
The FCA is proposing using its current “A” fee-block structure to calculate the levy, with the following firms expected to contribute:
- Deposit acceptors (A1);
- Life insurers (A4);
- Portfolio managers (A7);
- Managers of investment funds and operators of collective investment or pension schemes (A9) and;
- Advisers who do not hold client money (A13).
The FCA says small firms which only pay its minimum fee are exempt, as there is no “clear basis” for setting a levy that would be proportionate to the benefit that they would receive from the guidance service.
The Treasury will set the overall amount of the levy and it will be collected from firms by the FCA. The FCA will publish more details on how much firms will pay in October.
The FCA has set out three options for how to allocate the levy across the five relevant fee blocks.
The first is to base it on the FCA’s annual funding allocation, which would see advisers pay the largest proportion of costs at 30 per cent.
Deposit acceptors would pay 28 per cent, insurers would pay 17 per cent, portfolio managers 19 per cent and fund managers 6 per cent.
The second option is to split the levy equally so each fee block pays 20 per cent of costs.
The third is to allocate costs in line with what retirement products and services consumers choose. But the FCA says this would require further research and would not be as easy to implement as the other two options.
The FCA says: “We believe the firms that contribute to the retirement guidance levy should, as far as possible, be those that would potentially benefit when these consumers go on to purchase the financial products and services supplied by them.”