The Treasury has confirmed details of the new Pension Advice Allowance, which will take effect from April 2017, and which will enable people to withdraw £500, on up to three occasions, from their pension pots tax-free to put towards the cost of pensions and retirement advice.
Following an eight-week consultation period, the Economic Secretary to the Treasury, Simon Kirby, confirmed that the £500 allowance:
- can be used a total of three times, only once in a tax year, allowing people to access retirement advice at different stages of their lives, for example when first choosing pension or just prior to retirement;
- will be available at any age, allowing people of all ages to engage with retirement planning;
- can be redeemed against the cost of regulated financial advice, including ‘robo advice’ as well as traditional face-to-face advice; and
- will be available to holders of ‘defined contribution’ pensions and hybrid pensions with a defined contribution element, not ‘defined benefit’ or final salary type schemes.
According to recent research, UK savers with a pension pot of £100,000 save an average of £98 more every month and receive an additional income of £3,654 every year of their retirement if they take financial advice.