Pension savers will soon be able to withdraw up to £1500 tax-free from their pension pot to pay for financial advice, under plans unveiled by the government today (3 Feb).
The final policy, an elaboration of the original policy announced in August last year, will allow savers to withdraw £500 from their pension three times in their life.
Economic secretary to the Treasury Simon Kirby, said savers would only be able to make one withdrawal, of up to £500, in any given tax year.
He said it would be available at any age, and could be used to pay for robo-advice as well as traditional face-to-face advice.
However, it would only be available for defined contribution pensions or "hybrid" pensions with a DC element. It would not be available for defined benefit pensions.
The government quoted research that found only 22 per cent of pre-retirees knew the value of their pension pot, while only 14 per cent of people were confident planning their retirement without financial advice.
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."
"This allowance will help people get the vital financial help they need to plan for their retirement."
Life company LV, which has one of the more comprehensive robo-advice services on the market, welcomed the announcement.
David Stevens, director of advice strategy at LV, said: "The Government is absolutely right to allow people to access money from their pension pot to pay for advice and it’s positive this reform covers both traditional and ‘robo-advice’ to meet consumers’ changing habits.
He said the upfront cost of advice could be a "major barrier" to consumers seeking "vital" professional financial advice.
But Tom Selby, senior analyst at AJ Bell, was less enthusiastic, saying "we need to be realistic about what this will achieve".
"According to the Treasury’s own analysis, face-to-face advice costs £150 per hour on average, and can take up to nine hours for pensions – meaning even with the allowance you still might have to make up a shortfall of £850," he said.
"The sector is clearly evolving and innovative ‘robo-advice’ models may develop to help people assess their retirement options."
But he said we are "some way from that point" at the moment.
james.fernyhough@ft.com
