We cannot keep taxing the industry to provide a form of ‘Financial National Health Service’, the Personal Finance Society says.

The PFS has told the Government it should consider changing the way that the Financial Services Compensation Scheme is funded.

Responding to the Financial Advice Market Review, the professional body suggested creating a savings and investment premium tax, similar to Insurance Premium Tax.

In a letter submitted to the review panel, the PFS stated: “In terms of the cost of regulation the FSCS is the biggest issue as its uncapped and unpredictable nature means it is impossible for firms to plan within the P&L processes.

“The advice sector continues to raise concerns about rising levies and FSCS funding which urgently needs to be addressed to reduce the unfair impact on advised consumers.

“We cannot keep taxing the industry to provide a form of Financial National Health Service.

“The introduction of a savings and investment premium tax similar to Insurance Premium Tax might be a fairer and more transparent way forward, and would help alleviate the financial pressure on regulated firms and their clients.”

The PFS said: “Putting additional cost on top to fund the expansion of ‘free services’ compounds the issue and is neither transparent nor fair given that the cost has to be passed on, making advice appear disproportionately expensive.

“We therefore believe that there is an increasing case for greater clarity of costs which are being indirectly borne by the consumer of regulated services regarding the funding of regulatory, FSCS and ‘free’ information services.

“Alternative means of funding need to be explored, such as a pre-funded system or a model based on the risks taken by individual firms.

“A risk-based levy would also encourage advisers to think more about the long term consequences of their business models to the ultimate benefit of consumers.”