LEBC sees rise in salary sacrifice advice payments

LEBC sees rise in salary sacrifice advice payments

National advice firm LEBC has seen a rise in the number of employers paying for financial advice for their staff, while also incentivising savers to use salary sacrifice when they have to fund it for themselves.

Kay Ingram, director of policy at LEBC, told FTAdviser the firm, which also provides employee benefits to its corporate clients, has seen a growth in companies providing guidance, education and communication exercises.

She said: “I think that trend will continue, because employers are in the position to fund this on a very efficient basis, because the employee can have up to £500 paid by the employer for the advice, which is non-taxable.”

Ms Ingram is referring to legislation, introduced in 2017, which allows employers to fund or reimburse the first £500 per year on pension advice for a worker as a tax-exempt benefit.

She noted that companies were using this allowance more regularly, because companies like LEBC were making them more aware of it and some employees were asking for it.

Ms Ingram noted that savers were also being incentivised to ask to pay for the advice through salary sacrifice, which meant the individual will have savings on tax and national insurance.

She said: “More and more people are doing it. If you work for a company that doesn't want to pay for the advice, the least they can do is salary sacrifice, because all you're asking them to do is to take a deduction from your pay and pay it to the adviser.”

This feature is also being promoted by VouchedFor, which in 2017 launched pension vouchers which allow employees to spend up to £500 of their pre-tax earnings on advice.

With some 1,000 corporate clients, LEBC is also seeing an increase in appointments to offer financial advice or guidance to pension scheme members.

Ms Ingram said this was specifically the case when the company was looking to arrange a buy-out of benefits, as the employer will often want to make an offer to the members of the scheme.

She said: “For example, if a member transfer value is worth £100,000 and the employer will need to pay £200,000 to the insurer to secure that member's benefit, then it will often offer an enhanced transfer value to the members, and that requires guidance and advice to be given to the individual.”

She noted that in the vast majority of these cases, the employers or the trustees pay for the advice. 

She added: “The individual will only pay if they want additional advice beyond what has been agreed with the employer. 

“They sometimes do that, and the benefit is that a lot of the preliminary advice has been paid by the company.”

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