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How Govt’s apprentice funding freeze risks the future of advice

Existing training providers have seen their funding slashed while advice firms have to wait longer to register their employees for apprenticeship schemes

For the last decade, the advice profession has been facing its greatest challenge and it is now closer to crisis than ever before.

The average age of the adviser population sits at around 55, meaning that in another 10 years’ time, half will be over the age of 65: the current state retirement age. The industry needs fresh blood.

In April, all UK businesses with a salary roll of over £3m started to pay 0.5 per cent of their payroll into a pot. Each employer can then use their levy ing to pay for the training costs of apprentices within their business.

However, any funds paid into an employer’s levy pot that are not used within two years will expire and drip through to the Government budget. Some businesses have already said they do not intend to use their funds and have planned to write this off as a tax.

Small and medium enterprises – the majority of businesses within the advice sector – are not obliged to pay the levy. Rather, the apprentice funding process would be through “co-investment”, where the Government would pay 90 per cent of the costs of apprenticeship training and the employer would pay 10 per cent.

This would be delivered via training providers that have demonstrated their capability to offer apprenticeship training through a comprehensive application to the Employment and Skills Funding Agency.

These apprentice funding incentives are far more beneficial than they have ever been in the past and the advice sector has seen it as a perfect opportunity to help replenish the numbers within the profession.

However, the Government will not gain access to any unused levy funds until at least May 2019, when the first levy payments expire and pass through to its purse. Any funding for non-levy paying employers prior to that point will have to be funded directly from the Government’s current budget.

With this in mind, it did not come as a huge surprise when the Government announced in April it was pausing the procurement for apprenticeships for smaller employers and delaying its decision on funding allocations for training provision for non-levy-paying employers.

Not only did this announcement mean that new training providers would not be allocated any funds to train apprentices from non-levy paying employers but existing training providers have also since seen their funding slashed in comparison to their previous allocations – in some cases by up to 90 per cent.

In reality, the longer the Government delays this funding to non-levy paying employers, the less it will have to pay out of its own pocket and the sooner it will be able to get its hands on the unused money not spent by levy paying employers.

The general election is now a further delay to apprenticeship funding, meaning advice firms will need to wait longer until they can register their employees onto apprenticeship programmes.

I am sure this apprentice funding issue will be sorted out at some point but our industry has waited long enough to get on with replenishing the profession with the next generation of advisers.

We have had over 400 firms say they would take on an apprentice and many have already made progress with their plans to bring candidates into their businesses. Ironically, the Government’s lack of financial planning in this instance will exacerbate the problem our profession faces even further.

Tom Hegarty is managing director of the New Model Business Academy

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