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FSA defends consultancy charging stance to providers

FSA defends consultancy charging stance to providers

The Financial Services Authority (FSA) has defended its position on consultancy charging.

Speaking at the Association of British Insurers (ABI) retail distribution review (RDR) conference, FSA head of investment policy David Geale said that there were other ways for employers to pay for workplace advice rather than taking a charge from employee contributions.

Consultancy charging takes money from employee contributions before they have been paid into a pension pot, directing them to the corporate adviser who helped to set up and administer a workplace pension scheme.

The FSA has said consultancy charges can reduce contributions but only down to a minimum of 8%.

Geale (pictured) said where consultancy charges were applied they must be in the best interest of the client.

'We've been very clear that in some instances you will not need to use consultancy charging and when you do need to use it that it’s in the clients best interest and there's a tangible benefit that provides a better position for the employee, then that's fine,' he said.

The FSA’s comments follow lobbying by the ABI for it to shift its stance on consultancy charging.

It also comes after Pensions minister Steve Webb wrote to the ABI calling for an ‘urgent review’ of consultancy charging.

Webb said he was concerned over how consultancy charging would work with auto-enrolment and said it could be banned depending on the review’s findings.

Geale said away from consultancy charging the regulator had been in talks with HM Revenue & Customs (HMRC) over the tax treatment of platforms ahead of publishing its policy paper on platform regulation.

He said the FSA had received over 80 responses to the consultation paper, which was published in June, many of which raised questions over the tax treatment of platform rebates.

'We're taking those points into account and working with the HRMC and put the final policy paper out as soon as possible,’ he said.

He added that post 2012 the FSA would be keeping a close eye on non-advised sales, how firms evidenced and marketed their independent status, and that there was a clear separation between firms’ discretionary fund management business and advisory service, where this applied.

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