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Subsidy to continue as IFAs pay £1m levy

Product providers are set to continue the 85 per cent cross-subsidy of IFAs&#39 costs from the Financial Services Compensation Scheme, leaving advisers facing a bill of only £1m.

In a joint statement from Aifa and the ABI, expected in the next two weeks, the two bodies will announce the res-ults of negotiations which have been ongoing since N2 six months ago. The news comes as the FSCS has set the levy that investment firms will face for the current financial year at £56.4m down from £60.6m last year.

The FSCS estimates that £49m of this amount will apply to providers, with the remaining £7m coming from the IFA sector. But as a result of the cross-subsidy, 85 per cent of this £7m will be met by providers, leaving IFAs to pay about £1m.

FSCS chief executive Suz-anne McCarthy says 90 per cent of the levy will be used to pay for outstanding pension review cases, with the remaining 10 per cent covering the running costs of the scheme.

As reported in Money Marketing in April, a deal is also believed to have been reached between providers and IFAs regarding the £4m-£5m subsidy over regulation costs.

Aifa director general Paul Smee says: “I am delighted that our negotiations have reached a successful conclusion and the providers have agreed to continue the subsidy.”

ABI spokeswoman Emma Grainge says: “We are not making an announcement in the near future. The details have yet to be finalised.”

Baronworth Investment Services director Colin Jackson says: “It would be better if they contributed 100 per cent but as long as the subsidy does not decrease, I have no complaints.”

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