Money Advice Service to be scrapped

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Chancellor George Osborne will announce the closure of the Money Advice Service later today as part of the Budget.

Osborne’s decision comes as part of the review of Government-backed guidance services, launched alongside the Financial Advice Market Review last year.

The service is set to be replaced by a much smaller body with a focus on providing “frontline” services to those in financial difficulty.

While the guidance review was explicitly designed to cut down on duplication between services, the final FAMR report, published this week, called on the FCA to provide more support to firms who wish to offer their own guidance and information to customers, without crossing over into full advice.

A Treasury spokesman declined to comment on how the decision will affect other Government-backed services currently being offered by Citizens Advice and The Pensions Advisory Service.

TPAS and Citizens Advice are responsible for the phone-based and face-to-face elements of the Government’s Pension Wise guidance service, with the MAS providing additional online information.

The move comes almost exactly a year after an independent review of the MAS recommended that its budget be dramatically slashed, with the service refocused on primarily offering debt advice.

Since then, MAS chief executive Caroline Rookes has been working to redraw the organisation, unveiling plans in December to cut MAS’ total budget by £6m for 2016/17, from £81.1m to £75.1m.

The plan called for the ‘money guidance’ budget to be reduced by £4m, from £34.1m to £30.1m, while the debt advice budget would fall by £2m, from £47m to £45m.

The biggest planned spending reduction came through marketing, which was due to be slashed by 55 per cent from £8.8m to £4m, with the planned expenditure representing the second year in a row the MAS’ marketing spend has been drastically slashed.

The MAS has faced fierce criticism for its spending in the past – former chief executive Tony Hobman was forced to resign in 2012 after his FSA chairman Lord Turner admitted Hobman’s £350,000 salary was “rather too high”.

Hobman’s exit led the MAS to conduct a review of the chief executive’s remuneration, with Rookes subsequently appointed on a salary more than £200,000 lower than that of her predecessor.

Since then directors earning upwards of £200,000 have also departed.

And Rookes told Money Marketing as recently as January that over 54,800 consumers had used the organisation’s retirement adviser directory since it launched in April.

Of that group over 20,500 users, or 37 per cent, went on to contact an adviser as a result, she added.

A MAS spokeswoman says: “We will work with the government to fully consider the implications of any announcement. In the meantime we will continue to fulfil our statutory role to help people make the most of their money.”