HM Treasury has admitted that some savers may not be able to use its proposed £500 pension advice allowance.
A consultation was published yesterday afternoon setting out the government’s proposals.
Doubts about this allowance have previously been reported by FTAdviser, with one adviser saying it sounded similar to adviser charging via customer-agreed remuneration, which a number of providers do not allow for all policyholders.
Adviser charging by customer-agreed remuneration is a way for clients to pay via a charge on their premiums or funds, facilitated by their product provider.
The Treasury’s consultation has acknowledged that some providers and trustees do not offer this type of adviser charging for some products or schemes because of low demand.
It has said the new allowance, and the tax changes which it heralds, could help mitigate this in part but it recognised some people might not be able to access it.
The consultation document said: “A benefit to introducing the pensions advice allowance would be that funds withdrawn from a pension product that offers adviser charging could now be used to pay for advice on pension products that do not. This is not currently permitted by the tax rules.
“Under the new system, if an individual had, for example, legacy pensions without adviser charging facilities and a modern defined contribution pension with adviser charging, they could be able to access the allowance this way.
“However, it is the government’s understanding that if a consumer does not hold any pension products that offer adviser charging, the allowance may not be available to them.
“This is likely to be mitigated to some extent as some providers are routinely transferring customers into newer products that commonly have adviser charging facilities.”
Some advisers have also questioned whether £500 would be enough to pay for a comprehensive look at someone’s entire pension arrangement.
The Treasury said the proposals would “build on” the existing adviser charging regime so consumers would benefit from the protections the Financial Conduct Authority has already introduced and minimise burdens on advisers and providers.
It confirmed proposals to create a new authorised tax-free payment for pensions which would be for the facilitation of adviser charges up to £500, for the purpose of financial advice on retirement.
To be an authorised payment, the funds would need to be paid direct from the scheme to the financial adviser.
This means using adviser charging for advice on multiple pension pots, and other assets to be put towards a retirement income, would no longer be an unauthorised payment.
Economic Secretary to the Treasury, Simon Kirby, said: “Pensions and savings decisions are some of the most important a person will make during their lifetime.
“It is therefore vital that people can access the financial help they need and feel confident choosing the support that works for them in their retirement.
“I look forward to the industry engaging with the pensions advice allowance consultation, and taking this opportunity to tell us how the allowance could best meet the needs of both consumers and firms.”
The pension advice allowance is expected to come into effect in April 2017.
