Take Advantage of the New Pensions Advice Allowance!
Last week the Government announced its long anticipated plans for a Pensions Advice Allowance, following initial murmurings as part of last year’s Autumn Statement. The scheme is due to come into force on 6th April 2017.
If you are thinking “whoopee I can just put in a claim and the government will pay for me to get some free pension advice” then think again. You will still be paying for this advice yourself out of your pension fund. This new option just allows you to use some of it to pay for pension advice, whatever your age.
Basically, those saving for their retirement can take up to £1,500 from their pension pot as a tax-free sum, which can then be used to pay for financial advice about their future.
Research shows that currently only 22% of savers know the value of their pension pot as they approach retirement, and just 14% say they would be confident planning their retirement goals without having some financial advice first.
The Treasury is claiming that the cost of this advice could be around £150 per hour on average. The Pensions Advice Allowance appears to be a good way to help individuals get much needed advice about saving for their future without having to stump up the cash out of their income to pay for it.
Key points are:-
- If you have a defined contribution (DC) pension you will be able to access £500 from your pension pot on up to three separate occasions, however you’ll only be entitled to use up £500 of the total allowance in any tax year.
- Unfortunately, the scheme is not planned to be available for individuals with final salary or "defined benefit" schemes.
- The tax-free funds can be accessed at any age, whether you are close to retirement or not.
- It is intended that the £1,500 allowance be used to pay for the cost of pensions and retirement advice at important life stages, such as deciding which pension funds to useor perhaps immediately prior to your intended retirement when it will be important for you to consider your income options.
- The financial advice must be from a regulated source. It can either be given face to face or as part of online "robo-advice", where technology and online systems are used to help individuals review their finances.
- In order to make use of the full Pensions Advice Allowance, it’s obviously important to ensure that your pension pot has enough funds to cover the amounts to be withdrawn. You need to be sure you have plenty left to pay for your retirement!
- If you’re concerned about your financial situation in the run up to retirement, our legal and wealth management services team at THP can help with matters such as Tax Planning and Wealth Management.
To find out more about the services that we offer, call 0800 6520 025 to speak to a member of our team today.
We look forward to hearing from you!