Savers could be allowed to use a portion of their pension pots to pay for financial advice, according to a recommendation made in the Financial Advice Market Review report.
The final report, which follows a seven-month review, revealed there is a need for financial advice at retirement that is not currently being met.
It suggested one way of delivering this would be to allow consumers to access a proportion of their pension pot to redeem against the cost of advice before retirement.
Published today (14 March), the report also recommended that HM Treasury explore ways to improve the existing £150 income tax and National Insurance exemption for pensions advice arranged by an employer.
The FCA says as well as increasing the £150 exemption, providing advice could be made more attractive to employers by removing the cliff-edge that means the whole amount is taxable if firms pay over £150 for advice.
It suggested using the tax exemption for employer-arranged pension advice - available to the self-employed - to meet this need.
“FAMR believes that there is real value in giving people a strong nudge to seek financial advice well before retirement,” the report reads.
It pointed to research from Unbiased, which found those who sought retirement advice increased their retirement savings by an average of £98 a month.
“FAMR therefore recommends that the government explores options to give people access to a small part of their pension funds to pay for financial advice before normal retirement age.”
This “nudge” could happen five to 10 years before people reach the minimum pension age to ensure they have enough time to plan for retirement.
katherine.denham@ft.com
