Your IndustryJan 17 2018

Lack of clarity on annual allowance

twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by
Lack of clarity on annual allowance

Understanding the rules surrounding annual allowance is one of the biggest challenges facing financial advisers and has been the single highest reason why advisers call the Prudential Adviser Helpline.

One area that has become a source of confusion is the money purchase annual allowance (MPAA). It is a reduced annual allowance that can apply to contributions to defined contribution (DC) schemes, but there has been confusion over what triggers the MPAA.

Prudential said in 2017 its technical helpline for financial advisers took more than 17,000 calls – 3,000 more and over 20 per cent up on the previous year.  

This is the highest recorded number of users looking for help and advice since the facility was set up in its current form in 2007. The helpline comprises a team of 12 technical specialists and managers.

Les Cameron, head of technical at Prudential, said: “With increasing workloads and an ever-changing regulatory environment, advisers are grappling with the implications of annual allowance, resulting in it being the number one topic of conversation on our helpline last year. That’s not surprising because the rules are complex and take into account all income, including workplace benefits.

“Pensions planning is also proving problematic, with advisers seeking help with lifetime allowance, transfers, tax relief and death benefit options. Other topics advisers commonly request support for include inheritance tax, taxation of various wrappers, and trusts – from trust administration issues, to helping advisers identify which products may be suitable for their clients.

“In a change to recent form, the quiet Autumn Budget, where there weren’t many pension-related legislative changes, has provided some respite for hard-pressed advisers.”

Other topics advisers have requested help with include trusts and amending parties, appointing trustees and gifts into trusts, chargeable events such as the impact on tax position and who is liable, and pension transfers, lifetime allowance, tax relief and death benefits.

Joe Dunn, an adviser at Iceni Financial Advisers, said: “We are very geared up on what triggers the annual allowance, but a lot of customers do not really understand the implications. I do see people getting tripped up on this by their friends and family.”