Personal Pension  

Pension Wise funding cut by £100k

Pension Wise funding cut by £100k

On 30 June, the Financial Conduct Authority (FCA) has confirmed that Pension Wise funding will be cut to £22.5m from its earlier projected figure of £22.6m.

The 2016/2017 cost of the existing pension guidance service and the secondary annuities guidance service is £29.9m, the same as the last projection in April 2016.

However, the final split between the two has changed.

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£22.5 funding requirement in 2016/17

£39.1m funding in 2015/17

-42% drop in funding requirement

In its regulated fees and levies paper, the FCA proposed that the distribution of the allocation of the 2016/2017 Pension Wise funding requirement should be unchanged from the year before, with the exact same distribution to advisers.

In terms of responses on the proposed pensions guidance levy, one trade body got in touch with the FCA to say it believed that advisers, who pay 12 per cent, were paying too much.

The trade body highlighted recent data from Citizens Advice on how many people seek Pension Wise appointments, and said the vast majority of pension pots – 75 per cent to 80 per cent – are less than £50,000, and therefore paying for full advice is unlikely to be economic for most consumers.

The FCA responded by saying it reduced the allocation by 50 per cent to 12 per cent this year in recognition that financial advisers only benefit from the pension flexibilities and Pension Wise if consumers seek regulated advice.

It added it was not able to substantiate claims in relation to the Citizens Advice data on how many consumers who use Pension Wise go on to seek regulated advice.

Earlier this year, it was announced that advisers were set to shoulder the biggest burden for regulatory costs this year, as the FCA’s budget swelled to more than half a billion pounds.

Taking over the regulation of consumer credit has pushed the FCA’s total budget for 2016/2017 to £519.3m, an increase of 7.8 per cent on last year, according to the consultation paper published on 5 April alongside its plans for the year ahead.