Are you in for a penny, in for £500?

Ken Davy

Ken Davy

‘A penny for your thoughts’ used to be the old saying, however, it appears that as far as pensions are concerned, inflation has had a dramatic impact and turned 1p into £500.

I refer, of course, to the recent proposal that people are to be able to access up to £500 free of tax to pay for financial advice in advance of their retirement and, indeed, before the age of 55, when access is now readily available to all except those in government schemes.

As with any proposal impacting pensions, the devil is going to be in the detail and this will not be the perfect answer for every client who needs pre-retirement advice. However, some of the comments from advisers have been disappointing.

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For the first time we have a mainstream proposal from the government which acknowledges that people need, and are better off as a result of receiving, financial advice, which is a massive breakthrough.

It is also proposing a mechanism whereby the advice is paid for directly from an individual’s tax-exempt pension fund.

There are many complications and exceptions to be considered during the consultation period, and I would urge you to download the consultation paper and send in your views.

Despite the important role that evolving technology can play in the advice process, I am concerned at the suggestion that somehow ‘robo advice’ may be a catch-all solution, given the potential complexity of pre-retirement planning.

A prospective client is going to be able to pay you up to £500 direct from their pension fund for providing them with pre-retirement advice.

Given that most advisers do not charge for an initial exploratory meeting, this is likely to enable the client to have at least two meetings with an adviser.

I believe we should all wholeheartedly support this important initiative and embrace the opportunity it represents with both hands.

This proposal reinforces the positive messages about the value of personal financial advice and demonstrates that financial advice is, finally, starting to be appreciated at the highest level.

The absolute reality is that complaints against advisers have consistently been at an incredibly low level to the extent that an adviser is unlikely to have had a complaint upheld against them in 20 years.

Ken Davy is chairman of SimplyBiz Group