Advisers’ guidance guarantee bill could hit £4.2m in 2015/16

A Treasury update on the funding of the guarantee, now known as Pension wise, states the government will pay the set-up costs in 2014/15. A levy across the financial services industry will then fund its ongoing operation.

The initial cost estimate for 2015/16 is £35m and will be confirmed by the Financial Conduct Authority (FCA) in March.

A FCA consultation paper, released in November last year, said advisers were likely to have to foot 12% of the overall bill, working out to £4.2m for the 2015/16 financial year.

The FCA last year reduced the guidance guarantee burden on advisers by 50%. It also introduced a minimum fee threshold for advisers, meaning those with an annual income of less than £100,000 will not have to pay towards the levy.

Start-up costs

The Treasury said: “The operation of any service in its first year naturally carries a higher than usual degree of uncertainty.

“This is especially true here, given the number of people who have deferred a pension decision in FY14/15 and may wish to access the guidance alongside those coming up to that decision point during the year itself.”

It said rather than incorporate a contingency element into the initial levy, it would cover any costs above the levy value itself in the first instance, and “reclaim these from the subsequent year’s levy (consistent with the policy that the service should be funded by industry)”.

The update added: “This ensures both that the industry will only be asked to pay for what it can be said with confidence is required to fund the service, and that incentives to deliver an effective, efficient service, providing value for money, are fully aligned.”