The UK Treasury has outlined plans to allow savers to withdraw £500 tax free from their defined contribution pension to redeem against the cost of financial advice.
Launched today, the consultation follows recommendations by the Financial Advice Market Review, that it should look at creating a Pensions Advice Allowance to allow more people to access financial advice as the government bids to reduce the ‘savings gap’ in the UK.
Richard Freeman, chief distribution officer at Old Mutual Wealth, was part of the expert panel supporting government through the Financial Advice Market Review (FAMR) consultation process and remains part of the Financial Advice Working Group, which has been tasked with developing some of the recommendations set-out in the review.
Financial Advice Market Review
The consultation is the result of recommendations from the FAMR final report, which also includes proposals to ‘improve the existing £150 income tax and National Insurance exemption for employer-arranged advice on pensions.’
“The financial planning market has changed dramatically in recent years, as has the retirement savings landscape,” said Freeman. “Individuals approaching retirement have a plethora of options available to them and it is really important they are able to balance flexibility with sustainable, long-term planning. The best way to achieve this and get peace of mind and reassurance about retirement choices is to see a professional adviser.
“Being able to access part of your pension to cover the cost of advice is a step in the right direction and will help people meet the cost of retirement planning advice from a qualified professional,” he said.
‘More to be done’
As well this consultation launch, 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 financial advice,” added Freeman.
“There is still room for greater incentives for employers to help their staff meet the cost of advice. It is already possible for firms to help retiring employees get advice, with up to £150 of advice tax-exempt when arranged by the employer. This threshold should be increased to give consumers the best possible chance of accessing professional financial advice at retirement,” he said.