One of the key housekeeping moves in George Osborne’s next Budget on 8 July should be to get rid of the Money Advice Service.
Not only is Mas an expensive and inaccurate anachronism – it is actually legally barred from giving advice – but it also adds an extra level of regulatory costs for no material or useful consumer benefit whatsoever. The government is committed to reducing unnecessary regulatory costs, and while Mas is not itself a regulatory organisation, its substantial costs of almost £80m are passed on directly by the FCA to regulated firms.
Ironically, the one valuable role which Mas might naturally have been expected to take on following the Chancellor’s announcement last year of the new pension freedoms was delivering pensions guidance to those who really need it. George Osborne’s not unreasonable decision to give every individual the right to free ‘guidance’ – not, of course, advice – looked on the face of it to be a perfect fit for Mas. In practice, Mas completely failed to convince the Treasury that it was able to fulfil even this important but straightforward task and the job went to two other organisations, the Pensions Advisory Service and the Citizens Advice Bureau.
Nonetheless, Mas is still operating from offices in Central London, spending £79.1m a year, with financial advisers in the A13 fee block left footing this substantial bill for what is clearly a failing organisation. In addition, financial advisers are paying a further 12 per cent towards the cost of the pensions guidance levy when the likely benefits for the sector will be insignificant compared with the benefits which will accrue to the money managers. It is clear that over the years, the impact of the new pension freedoms will generate billions in extra fees for investment houses and money managers for looking after funds which previously would have disappeared into annuities.
The good news is that, thanks to some detailed analysis of who the real beneficiaries of pension freedom would be, this particular levy has been reduced substantially from the 30 per cent originally proposed. In addition and very importantly, firms with a yearly turnover of less than £100,000 have been completely exempted from this levy. I believe this is welcome common sense from the FCA, both from an administrative perspective and from one of fairness.
It is only a glimmer of light, but it should give all financial advisers some hope that the regulator is starting to recognise the vital role that our sector has to play in the future for the benefit of consumers and the market as a whole.
Ken Davy is chairman of SimplyBiz