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.

Top Tips for Saving Money

Top Tips for Saving Money

  1. Look around for the cheapest household insurance policies

Home insurance is not mandatory – you don’t need insurance. However it is strongly advisable. Can you afford to pay the bill if your house catches fire or is smashed into by a 4×4 driver playing Angry Birds, who takes off from the scene like a sparrow in a catapult? Unlikely. Searching online is the quickest and best way of finding the household insurance policy that saves you the most £££. It will allow you to compare hundreds of policies in a matter of minutes.

Annual Savings: £100’s

  1. Change your approach towards your mortgage

Unless you’re planning on buying a private jet or a small island the most expensive purchase you are ever likely to make is your home. If taking out a loan to finance your future house, make it is the best available to you. For example, if you are paying your moneylender’s full standard variable rate (SVR) you are probably going to be paying hundreds of pounds a year more than you actually need to. There are literally thousands of deals out there to choose from however it is key to check the fine print for any hidden catches, this is a relatively straightforward way to you a lot of that hard earned money. Top tip: loyalty to your bank benefits your bank, not you.

Overpayments on your mortgage are an even better way of making massive savings. If you can afford to make overpayments, you could clear your debt several years early. For example, if you look to loan £150,000 at 6% over 25 years, you will pay it back at £966 a month. This results in a total charge of £139,000 for credit. However if you can afford to overpay by £150 a month you will clear the debt in under 19 years, giving you 6 years of mortgage-free living and saving a whopping £37,500 in interest.

Annual Savings: £1,000’s+

  1. Have another look at your life insurance policy

Ever since we started bathing regularly, humans have been getting healthier. As a result our life expectancy has gone through the roof – with the cost of insuring the unthinkable decreasing all the time. If you were sold a life insurance policy at the same time you took out your mortgage you may have been too distracted to shop around. You could be missing a trick.

Annual Savings: £100

  1. Make full use of your ISA allowances

If you didn’t already know, you can save up to £15,240 in an ISA which is a tax-free savings account (for the more financially savvy of you there’s also an investment ISA which deals in stocks and shares). It means that any interest accumulated in your account is tax free.

Annual Savings: £100’s+

  1. Consider installing a water meter

We take our tap water for granted. If you have a home with few occupants you may want to consider installing a meter instead of having an unlimited water plan. It may surprise you to hear this could halve your annual bill.

Annual Savings: £100’s

  1. Fight your parking tickets

If we don’t all love getting parking tickets. Those traffic wardens that cower behind the nation’s wheelie bins with their notepads and cameras waiting to pounce upon unexpecting motorists the second they set one tire out of line. In the event of being awarded a parking ticket you feel was unjust its simple… fight back.

Annual Savings: £100

Link: How to fight parking tickets