Economic Secretary to the Treasury and City minister John Glen has replied to an MP who wrote to him on behalf of a concerned financial adviser regarding the Financial Services Compensation Scheme (FSCS) levy, Professional Adviser can reveal.
According to correspondence seen by PA, Glen (pictured) responded to Labour MP Sharon Hodgson for Washington and Sunderland West on 19 February. Hodgson had sent the letter on behalf of an independent financial adviser within her constituency.
In the letter, Glen said that while he appreciated the adviser's concern regarding the levy, the government has no role in setting the price. "... As I am sure you will understand, the FSCS is an independent non-governmental body.
He continued: "The FSCS carries out its compensation function within rules set by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA), who are also independent from government. It is for the FCA and PRA to consider the impact of the levies on the firms they regulate, acting in line with their statutory duties, and to review the level at which they are set."
Former FCA-man Rory Percival said there has been a "misunderstanding" about responsibilities. "[The] FCA decide which sector pays what to FSCS.[The] Government decides whether FSCS is paid for by financial services firms or by other means such as product levy (Personal Finance Society suggestion), fines, taxation or other means."
Earlier this month, PA, alongside the Personal Finance Society, the Personal Investment Management & Financial Advice Association and IFA David Penney, who kickstarted the latest drive to reform the levy, said they were campaigning for change.
During the past month, many MPs have been inundated with FSCS levy-related letters asking for parliamentary attention to be giving to the rising levy. Advisers will face higher levy bills once again this year as the lifeboat fund is set to raise its overall levy to £635m for 2020/21 with advisers set to be collectively billed £213m.
This is in addition to a supplementary levy of £50m from the life distribution, pensions and investment intermediation class in 2019/20. The levy remains a point of contention among the sector, with many arguing the current funding model is unfair, forcing the ‘good guys' to pay the price for others going out of business.
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