The annual funding requirement for the FSA in 2008/09 will rise by 6.9 per cent, meaning higher fees for advisers.
The regulator generates its AFR through adviser fees, which will increase above the rate of inflation this year. This will encompass the 10 to 15 per cent rise small firms will face this year to fund the treating customers fairly regime.
Chief executive Hector Sants says the increased AFR is needed for its small firms enhanced supervision strategy, the move to principle-based regulation and its IT investment. He says: “I recognise this is an above-inflation increase but believe that, given the increased risk with which the FSA now has to deal, it will be supported by our fee-payers.
The total expenditure requirement has risen by 7.1 per cent to £323m from £301.7m in 2007.
The regulator will further reduce the deficit in its final-salary pension scheme, with additional pension contributions of £2.5m in 2008/09.
The FSA has raised its staff spending by 7.3 per cent, which it says includes travel, training, recruitment and pension scheme deficit reduction contributions.
The budget states: “We will increase our payroll expenditure by 4.5 per cent, which reflects the importance of attracting, developing and retaining talented people to operate in a more principle-based regulatory environment. This is slightly higher than the recent annual retail price index inflation of 4.2 per cent and significantly ahead of the consumer price index inflation of 2.1 per cent in October 2007.”
The FSA’s staff bonus funding shows a rise from an average of 12 per cent to 15 per cent for 2008/09.