The government is set to give pension savers access to £1,000 to spend on advice, as two new initiatives may be used together.
In last month’s Budget, the chancellor announced the Treasury would be increasing the tax exemption for employer arranged-pension advice from £150 to £500 from April 2017.
It will also be consulting over the summer on introducing a Pensions Advice Allowance - announced in the Financial Advice Market Review report - which would allow people to withdraw £500 tax free from their defined contribution pension pot before the age of 55 for financial advice.
FTAdviser understands it is the Treasury’s intention the two allowances will work together, so for those who are able to use both, this means access to up to £1,000 for advice.
A HM Treasury spokesperson said: “The government wants to help people understand their pensions so they can plan for a comfortable retirement.”
Anna Sofat, chartered financial planner at Addidi Wealth, said this should be good news “as long as the bigger advisory firm do not take advantage of it to subside service they are already providing and its genuinely to advise the individual over their pensions”.
Matthew Harris, owner and IFA at Dalbeath Financial Planning, commented: “As long as it is easy for people to take advantage of this allowance, without having to fill out multiple provider forms and fight through risk warning after risk warning, this will be good news and will improve the quality of quantity of advice available to people when they need it most.”
The FAMR report, which followed a seven-month review into the advice gap in the UK between those who could benefit from advice and those who can afford it, revealed 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.
This was followed by the extra incentive for employers to offer advice on their company pension schemes, announced in the March Budget.
The latest changes follow sweeping reforms to the pension landscape in the 2014 Budget, which for the first time gave people unfettered access to their retirement savings from age 55, prompting a greater need for financial advice.
