From April this year those saving into a pension will be able to access up to £1,500 from their pot, tax-free, to help them pay for financial advice.
The new Pension Advice Allowance – announced in last year’s Autumn Statement – will allow people to withdraw up to £500 from their pension pots on up to three separate occasions to help cover the costs of professional advice.
Savers will only be able to access one £500 allowance in any tax year, meaning that over their lives they will be able to seek advice in different years without incurring a tax charge on the money they withdraw.
As an example, a person could decide to access money early on when choosing a pension, then in middle age to ensure it is meeting their requirements and then again prior to retirement when considering income options.
Savers can access these tax-free funds at any age and can use them to help cover the cost of any form of regulated financial advice, provided they have got a defined contribution (DC) pension or a hybrid pension with a DC element. Those with a defined benefit or final salary style scheme will not be able to access funds.
“Pensions and savings decisions are some of the most important a person will make during their lifetime,” said Economic Secretary to the Treasury, Simon Kirby. “This allowance will help people get the vital financial help they need to plan for their retirement.”
According to the Government only 22 per cent of people know the value of their pension pot when approaching retirement and only 14 per cent would be confident planning their retirement goals without financial advice, so the move will provide many more people with the chance to plan ahead with professional help.