Pensions advice allowance

From 6 April 2017 the tax legislation has been amended to permit individuals with defined contribution or hybrid benefits to use their pension pots to pay for financial advice without adverse tax consequences. The pensions advice allowance enables individuals (members or other scheme beneficiaries) to access up to £500 from their pot up to three times during their lifetime. It is designed to allow people to obtain advice connected with their pension and retirement savings at different stages in their lives. The allowance can be used at any age, but only once in any tax year.

The allowance can only be used to pay for retirement financial advice, which is defined as “advice in respect of a person's financial position, including his pension arrangements and the use of his pension funds”. The advice must also be regulated financial advice, provided by a financial advisor regulated and authorised by the Financial Conduct Authority to provide such advice.

Why this may be of interest

Trustees and scheme providers are not obliged to offer individuals access to the allowance, but we know that many of you will want to do so where possible. We also expect that as it is a tax-free benefit to individuals, and will be promoted by PensionsWise and the government, there will be a high level of interest from members. However, some schemes may need amending to allow this. Please click here for more details of the allowance, an explanation of the conditions that must be met for individuals to take advantage of this allowance, and consideration of when trustees may wish to propose an amendment to their scheme’s Rules so that they can pay the allowance from the scheme.

If you have any questions, or would like to discuss this further, please do not hesitate to get in touch with the Linklaters Pensions team or your usual Pensions contact.