People planning their retirement will be able to withdraw up to £1,500 from their pension pots tax-free to pay for financial advice, under plans unveiled by the government today.
The new Pension Advice Allowance, first announced at Autumn Statement 2016, will enable people to withdraw £500 on up to three occasions from their pension pots tax-free to put towards the cost of pensions and retirement advice from April 2017.
Simon Kirby. the Economic Secretary to the Treasury, has today confirmed that the £500 allowance:
- can be used a total of three times, only once in a tax year, allowing people to access retirement advice at different stages of their lives, for example when first choosing a pension or just prior to retirement.
- will be available at any age, allowing people of all ages to engage with retirement planning.
- can be redeemed against the cost of regulated financial advice, including ‘robo advice’ as well as traditional face-to-face advice.
- will be available to holders of “defined contribution” pensions and hybrid pensions with a defined contribution element, not “defined benefit” or final salary type schemes.
Pension providers will be able to offer the allowance to their members from April 2017.
Research has found that when approaching retirement only 22% of people know the value of their pension pot and only 14% of people would be confident planning their retirement goals without financial advice.
According to adviser platform Unbiased, UK savers with a pension pot of £100,000 save an average of £98 more every month and receive an additional income of £3,654 every year of their retirement if they take financial advice.
Mr Kirby says: “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.”
The Government has published a response to the consultation on introducing a Pensions Advice Allowance and HMRC will now conduct a three week technical consultation on the draft regulations.