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.