From April, savers will be able to withdraw up to £1,500 tax-free from their pension pots in order to pay for financial advice, the government has recently confirmed.
Announced in 2016’s Autumn Statement, the new Pension Advice Allowance will enable individuals to take out £500 up to three times, but only once during a tax year.
It’s been designed specifically to give savers access to retirement advice at different points over their lifetime. This may be where the individual is reaching retirement or when they are selecting a pension.
Including robo advice, the Allowance can be redeemed against the charge for any regulated financial advice and is available at any age.
Those eligible for the Allowance, as has been confirmed by the government, include holders of DC pensions and hybrid pensions with a defined contribution element. It is not available for DB or final salary type schemes.
Commenting on the introduction of the Allowance was Simon Kirby. The Economic Secretary to the Treasury stated: “Pensions and savings decisions are some of the most important a person will make during their lifetime.
“This allowance will help people get the vital financial help they need to plan for their retirement.”
Also highlighting the benefits of the new Allowance was David Stevens, Director of Advice Strategy at LV=. He commented on the importance of financial advice as well as the cost related hurdles that consumers currently face.
“The Government is absolutely right to allow people to access money from their pension pot to pay for advice and it’s positive this reform covers both traditional and ‘robo-advice’ to meet consumers’ changing habits.
“We know that the upfront cost of advice can be a major barrier for consumers and today’s announcement should ensure that more people can get the help and support they need. Professional financial advice is vital for retirement planning to help people make the right decisions for them and ensure consumers get the most from their hard-earned savings.”
