The Economic Secretary to the Treasury, Simon Kirby, has confirmed that pension scheme members can use £500 of their pension pot to access financial advice on their pension. This is linked in with the pension freedoms introduced over the past few years
The £500 will be tax-free and will not be treated as part of the 25% tax-free lump sum from the pension. A member can access the £500 three times but no more than once in any tax year. The allowance has to be paid direct to the financial adviser. It can be used for face to face advice or online advice and. if appropriate, to cover the implementation fee.
There is no age limit on when the advice can be taken, which is good as a younger member may benefit more from advice as they will have the opportunity to increase their contributions if the pension fund is not going to produce the level of income they would like on retirement. Taking advice later in life may help the member secure a better deal with the funds they have but it may be too late to increase the size of the fund.
The allowance is not available to members of defined benefit pension schemes.
The government is also going to introduce an income tax exemption to cover the first £500-worth of pensions advice provided by an employer to an employee in a tax year and this tax exempt sum can be combined with the £500 pension advice allowance.