Pension Advice Allowance of £500

Pension Advice Allowance of £500

Closing the ‘advice gap’

A new government scheme is offering a £500 tax-free allowance to pay for professional pensions advice allowance.

“Individuals approaching retirement have a plethora of options available to them. The best way to achieve this and get peace of mind and reassurance about retirement choices is to see a professional adviser” – Richard Freeman, chief distribution officer at Old Mutual Wealth

Pensions Advice Allowance

Financial Advice Market Review (FAMR) found that there is an ‘advice gap’ for retirement advice for people without “significant wealth”, calling on the treasury to introduce a tax free stipend from pensions to make financial advice more affordable and easily accessible. The pensions advice allowance will come into force from April 2017 and will allow people below age 55 to take up to £500 out of their pension plans tax free to put towards the cost of financial advice. It is possible that people as young as 45 could be eligible for the scheme, which will be in addition to the normal 25% tax-free lump sum you can take out of your pot from age 55.

Do I just get one allowance?

The government is considering letting people use the pensions advice allowance more than once. That is very useful as it means you could use it to help pay for more advice if your circumstances change a few years down the line.

What sort of advice can I get for £500?

According to the government, face-to-face financial advice costs on average £150 per hour, and for pension/retirement planning, you might be looking at up to 9 hours, which could add up to £1,350.

The pensions advice service provided by Financial Advisers will vary from firm to firm, however as an example at Heritage we provide a detailed recommendation report, which will be produced after we have fully accessed your current pension arrangements. This will include analysing the current risk of your portfolio, the performance, the structure, along with the features and benefits of the current plan.
In addition we can also produce a cash flow model report, which will consider the potential future income that your pension plan (s) will generate versus your goals and objectives in retirement. The report will help to tell you if you are on track for your retirement aspirations, or if you need to adjust your savings / targets.

Why should I seek advice via the Pensions Advice Allowance?

Professional adviser search website Unbiased claims that people who take professional advice save on average £98 more every month and receive an additional income of £3,654 every year of their retirement, based on a pot of £100,000.

More to be done!

Freeman believes that there is still more to be done and predicts more proposals for change from within the FAMR recommendations following its launch last year. “We hope it will be the first of many measures introduced to help people access”.

Contact one of the team to find out more about the Pensions Advice Allowance.

What Brexit means for the UK and the EU

What Brexit means for the UK and the EU

The UK’s surprise decision at the Polls – Brexit

The end of polling in the UK’s referendum on continued participation in the European Union (EU) at 10pm London time on Thursday proved to be the high point in the expectations that a ‘remain’ vote would prevail.  At that moment a well-known betting organisation placed a 90%+ probability on the continuation of the political and economic bloc’s status quo.  A little over six hours later such hopes were completely dashed.

The 52%/48% victory for the ‘leave’ campaign reflects a widespread distrust of Europe-wide policy-making and regulatory intervention in the UK as well as a scepticism about immigration and a nationalism which prefers more complete rule from the UK’s Parliament.  The rejection of the preferred choice of the favoured choice of most of the UK’s political leadership and almost all countries of note has implications far beyond the UK.

Given the unanticipated nature of this decision it is not too surprising that the British Pound fell sharply – briefly to a 30+ year low against the US dollar – and the UK equity market followed suit.  Financial market volatility was augmented by the resignation of the UK Prime Minister who will stay in office just to oversee the election of his successor.  Fears that rating agencies will downgrade their AAA ratings on UK debt and that the Bank of England would have to enact some support mechanisms to help the Pound completed the scene.

The UK has a two year period of grace to negotiate its exit from the European Union and much uncertainty surrounds the practicalities around this move.  Leading European Union politicians have generally been quite coy on next steps so far although more clarity is expected over the weekend.  The UK will leave the European Union though and will have to strike new, bilateral trade deals.  There is inevitability uncertainty around this and the scope to have a direct impact on economic growth rates over the next few years is clear – after all most formal economic studies on the impact of a “Brexit” identified clear economic growth declines.

The decision will also impact European politics and potentially even the structure of the euro single currency zone.  Nationalist politicians across the European Continent are starting to demand their own referendums and the upcoming Spanish election this weekend could reflect a continuation of the electoral disquiet via a large vote for the anti-austerity party on the bill.  These are difficult times for Europe and policy-makers need to re-engage on a broader European vision for the future blending economic flexibility reforms and greater cross-border support.   We can not rule out more economic policy stimulus.

The same is true for the UK.  The country cannot just rely on a sharp fall in the value of the Pound to come to their aid.  If the UK wishes to take full advantage of exiting the European Union then it too must boost flexibility further – but how to do this without such a direct flow of immigrant labour (if tighter restrictions are imposed on entry which is likely) and also countering the feeling of anti-austerity disquiet at a time that fiscal and trade deficits are already high is not clear.  Now comes the harder part of policy implementation.

As today’s financial market moves show it is hard not to conclude that Europe (including the UK) has scored an old goal today with unclear repercussions over time.  The best companies will still prove able investments but for most international investors the general European markets have become that little bit harder to invest in.

This article is for information purposes only and should not be taken as advice.

The Sunset Clause

The new dawn for financial advice

The clock is ticking and the months counting down until the day the sunset clause comes into affect. With its name perhaps reminiscent of special moments, holidays and beach strolls, for some advisers this particular sunset is going to be anything but relaxing. Adapting a business to a new set of rules that had not even been dreamt of when the business was born can be a significant task, and clearly steps need to be taken sooner rather than later to move into the new, post-sunset world.

As advisers are all too aware, on 6 April 2016 all trail commission will be switched off for platforms and corporate pensions. When the sun sets on 5 April next year, the hard work will have been done, and advisers will know that when they wake up the new shape of businesses in the postsunset world will have eclipsed the old forever more. So as the sun goes down on trail commission, what should advisers expect of the transition?

Sizing up the task

The size of the challenge faced by the sunset clause clearly varies hugely between firms. Those who have been established for longer may well have originally had a higher proportion of their income streams based around trail commission than newer firms would expect to today. But equally, older firms may have had the opportunity to adapt their business models earlier than others. Either way, the scale of the issue for the financial advice industry is clearly significant. In a recent survey conducted by Intelliflo, 93% of the 199 respondents reported that they still receive trail commission.

The good news is that although there is clearly work to do in order to meet the new rules, trail commission for most is providing a relatively small proportion of income – less than a fifth of income for 62% of advisers in our survey. Only eight per cent reported that trail commission accounted for more than 41% of income. Clearly switching that off will have a substantial impact on that group, but even for advisers less reliant on it, an issue that affects even 10% of income is big enough to warrant some serious attention. In any case the workload in actually implementing the change may involve a similar amount of input, even if the overall effect on income is small.

The evolving business of financial advice

The adviser market has already proved through the RDR that it is adaptive and resilient, and the Intelliflo research reinforces that picture. Front-loading the workload, 27% have already written to clients to explain the changes to trail commission, with another 34% planning to do so during 2015. Eighty-seven per cent of respondents report that they are already regularly and accurately reconciling fees and income, a process that is far more straightforward if the technological structure of the business supports the process and enables it to be efficient.