In August 2015 the Financial Conduct Authority (FCA) and HM Treasury set up the Financial Advice Market Review, tasked with finding ways to make the market for financial advice in the UK work better. One of its recommendations was for HM Treasury to explore options to allow consumers to access a small part of their pension pot before the normal minimum pension age, to redeem against the cost of pre-retirement advice. HM Treasury launched a consultation on this proposed Pensions Advice Allowance in August 2016 and has now announced the outcome.
The proposed features of the new Allowance are:
The Allowance can be used to pay for pensions or retirement advice. Retirement advice need not be restricted to purely pensions matters but can include many other issues relevant to an individual’s retirement planning.
Interaction with the increased allowance for employer-funded advice
From 6 April 2017, individuals will have a £500 annual tax- and NIC-free allowance for employer-funded pensions advice (with the cost of any advice above that level subject to tax and NIC as a benefit in kind). It will be possible to combine that allowance with the Pensions Advice Allowance to enable individuals to access up to £1,000 of tax-advantaged financial advice. The use of one exemption does not prevent an individual from accessing the other.
Scheme members will not have an automatic right to access the Allowance. It is likely that trust-based scheme rules will require amendment in order to make it available.
Details of the Allowance will be set out in regulations (which are being circulated in draft for a brief period of consultation). Detailed HMRC guidance will be published shortly after the Allowance comes into force on 6 April 2017.
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