UK Instigates New £500 Tax Free Pension Advice
About £500 is the amount UK pensioners can take out from their pension pots that is tax free. The miniscule amount is intended to be the pensioners’ payment for taking proper financial advice from their pension companies following the alarming concerns on ‘advice gap’ and increasing numbers of pensioners withdrawing huge amounts of pensions without minding tax or reductions due to lack of financial advice.
The FCA’s consultation paper published last Tuesday indicates the Pension Advice Allowance is to come full-force on April 2017. People below the age of 55 can take out about £500 from their pension plans tax-free to pay for the cost of financial advice.
The FCA’s consultation paper indicates that the amount may also be used for robo-advice or automated advice services, which also cost roughly the same amount.
Face-to-face financial advice costs about £150 an hour on average.
Employer-arranged advice is also placed at £500 and can be used in conjunction with the pensions advice allowance, allowing people access of up to £1,000 of tax-advantaged financial advice.
“In today’s pension world, individuals have complete freedom over how to draw their pension benefits, but choosing what’s best can be daunting without access to advice,” said Steven Cameron, Aegon’s pensions director.
Tom McPhail, head of retirement policy at Hargreaves Lansdown said the allowance is “good news for consumers” but warned it may put them at risk from fraudsters pretending to be financial adviser.