The amount of money adviser firms pay towards funding the Money Advice Service (MAS) could drop dramatically from £4.6 million to £300,000 if Financial Services Authority (FSA) proposals get the green light.
Under plans published by the regulator funding would be allocated based on how consumers have used the website, telephone advice line and face-to-face services MAS offers.
The current funding system, which was introduced on a temporary basis when MAS was launched in April 2011, mirrors the funding blocks used to allocate FSA levies.
Under this system advisers pay around 10% of MAS’s £46.5 million costs.
If the changes go through, the total cost for firms in the fee block which includes advisers would fall 93% from the £4.6 million allocated for 2012/13 to £300,000, the FSA said.
The proportion this block funds MAS’s budget would drop from 9.9% to 0.7%.
The drop in the allocation reflects the fact only 2.6% of people using MAS are expected to get financial help and advice.
The FSA said: ‘The proposed allocation method affords a clearer link between how consumers use the service the MAS provides and which firms pay for it. The link is not perfect but it replaces the current allocation method that has no such relationship.’
Under the proposed system home finance providers and administrators will see the amount they pay towards funding MAS increase by a substantial amount, 1,309% from £1.1 million to £15.5 million.
In December last year MAS also announced that it was consulting on £2.5 million in cuts to its budget for 2013/14.
It proposed a total budget of £78.3 million for 2013/14, with £43.8m allocated to money advice and £34.5 million for debt advice. There will be no changes to the way debt advice costs are levied on banks, building societies and lenders, it said.