IFAs have reacted in anger to the Financial Services Authority's announcement it has used excess fees to fund its pension deficit.
In its annual report published yesterday the FSA stated: “The income generated from fee payers is 1.2% more than net expenditure for the year and that excess has been applied to make an additional contribution to funding our pension deficit.”
In response to yesterday’s article, IFAs have questioned why the FSA is not reducing the amount of fees firms pay for the following year.
The Association of Independent Financial Advisers (Aifa) has calculated the rise in Financial Services Compensation Scheme (Fscs) levies from £3.9m to £47.5m over four years has resulted in a bill of £1,440 per adviser for the Fscs bill alone.
Following the report yesterday into the FSA using excess intermediary fees to plug its pensions blackhole IFAonline wants to know your views.
Ken Bannister, senior partner at Bannister Independent Financial Planners, states: “I would be interested to know why the 1.2% excess is being used to prop up FSA pension funds and not used to reduce the ever increasing FSA fees.”
Moreover, James Little, director of Alchemy Financial Limited, questions why the regulator has a final salary pension scheme in place when a defined contribution scheme would be cheaper.
He suggests the FSA could move to a lower cost office space in a provincial city rather than being based in central London.
Meanwhile, Gary Plein, IFA at Aspire, says the FSA could consider refunding firms the excess, as IFAs currently struggle to fund their own pensions.
John Ellis, head of public affairs at the Personal Finance Society (Pfs), adds: “Why isn’t the excess being used to reduce fees? I think it should be. You could say the pension scheme is part of the running costs of the FSA but it has always tried to ring-fence the issue. If there is an overpayment it should be used to reduce the fees for the next year.”
But Rob McIvor, head of web and media communications at the FSA, says like any organisation the FSA needs to fund its pension deficit, which it brought across from the previous regulator.
He states: “The fees are not set with the objective to have a surplus- we estimate how much will be generated. The rise in the number of firms last year, as a result of regulating mortgage and general insurance firms, meant the fees went up but we will take this into account when we set the fees for next year.”
McIvor adds fees are proportionate to activity in the marketplace so in some years, if the market is more active, fees will be higher than the FSA forecast.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Emily Perryman on 020 7968 4554 or email [email protected].IFAonline
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