At Age UK’s later life conference today (5 September), Tom McPhail, head of retirement policy at Hargreaves Lansdown, said £500 was not enough to help people gain access to thorough advice.
He said: "We always tell people that they should use the advice service, but there is not a lot that you can do with £500.
"The regulator is looking at reviews to assess how retail advice is given and what guidance is being provided currently. There is a lot of improvement that needs to be made."
The pension advice allowance was launched in April 2017 and allows savers to pay for pension advice by accessing their pensions savings in three instalments of a maximum of £500 each.
It was a central initiative of the Financial Advice Market Review - orchestrated by the Financial Conduct Authority and HM Treasury - designed to help more people get access to advice who may not have been able to afford to pay for it from their disposable income.
But industry voices calling for reform have intensified in recent weeks.
The Personal Investment Management and Financial Advice Association (Pimfa) said in its response to the current Work and Pensions select committee inquiry on pension costs and transparency the allowance should be increased or consolidated into a £1500 lump sum.
Simon Harrington, senior policy adviser at Pimfa, said greater take-up of advice could only be achieved if people understood its "implicit value", therefore initiatives such as the advice allowance were a way to achieve this.
The Work and Pensions committee launched an inquiry into the cost of pension provision, including financial advice, at the beginning of August.
Mr McPhail also reiterated his call for a change to auto enrolment that would allow people to take charge of their pension pots.
He said under the current system people were at risk of losing their pensions, particularly when they changed employers.
He said: "It is vital that people know what they have and where it is. When people auto enrol, another pension pot is set up for them automatically and it is very easy for people to lose track of where their money is.
"When people start a working under a new employer, they should be able to ask their new employer to put money into one of their existing pension pots."
Hargreaves is lobbying the government to introduce new rules that would allow individuals to keep their old pension provider after they change jobs.
The idea differs from pot-follows-member - a system halted by former pension minister Baroness Ros Altmann - which would have allowed a saver's auto-enrolment pension to follow them from job to job, by transferring the funds from provider to provider.
The firm’s proposal is to give investors with a pre-existing pension who join a new employer the right to choose that previous provider, rather than joining their new employer’s scheme and ending up with a new pension arrangement.
rosie.quigley@ft.com
