Transact will pay all fund manager rebates to clients as units into money market and gilt funds from 1 April.
Money Marketing’s sister title, Fundweb, revealed last week that the FCA will allow unit rebates from platforms to be paid to clients in units of any fund they choose regardless of the fund they were originally invested in.
The decision on which fund the unit rebate is paid back in could also be made by the platform, dependent on its client terms and conditions.
The move throws the ban on cash rebates into question as unit rebates will be allowed to be paid back into cash funds.
Other platforms including Nuc-leus, Skandia and Fidelity say they will continue to pay rebates in units of a client’s original fund holding.
Ahead of the clarification from the FCA, Transact sent an email to clients last week explaining that from 1 April all unit rebates will be passed on to clients in units of gilt funds for Isas or money market funds for all other accounts.
Transact refers to these as “rebate reinvestment funds”. Where cash is needed to pay the platform fee, units in these will be sold first to cover the fee.
The platform says the decision was made because it felt that allowing clients to choose which funds to invest the unit rebates in would add unnecessary complexity.
Cash rebates to clients are banned on new business from April but can continue on legacy business.
Unit rebates are permitted but are subject to income tax where they sit outside a tax wrapper.
Transact chief development officer Jonathan Gunby says: “Our approach is to do something simple to understand and which minimises the tax implications for the client.”
The Lang Cat principal Mark Polson says: “If the FCA had a second chance, it would probably not go ahead with the cash rebate ban.
Transact obviously has been aggressive in its implementation of rebates and feels this is the best way to do things.”