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New tax-free Pension Advice Allowance announced

Savers will be able to access up to £1,500 tax-free from their pension pots for financial advice under new government rules set to come into effect this April.

06 FEB 2017 | CHRIS SEEKINGS
Financial advice is "vital for retirement planning" ©Shutterstock
Financial advice is "vital for retirement planning" ©Shutterstock

The Pension Advice Allowance will enable people to withdraw £500 up to three times, but only once each year, allowing for advice at different stages in their lives.

This allowance can be used to cover the cost of any regulated financial advice, whether it is given digitally or in a traditional face-to-face capacity.

LV director of advice strategy, David Stevens, said: “The government is absolutely right to allow people to access money from their pension pot to pay for advice, and it’s positive this reform covers both traditional and ‘robo-advice’ to meet consumers’ changing habits.

“We know that the upfront cost of advice can be a major barrier for consumers and today’s announcement should ensure that more people can get the help and support they need.

“Professional financial advice is vital for retirement planning to help people make the right decisions for them and ensure consumers get the most from their hard-earned savings.”

The tax-free allowance will be available to holders of defined contribution (DC) pensions and hybrid pensions with a DC element, but not to people in defined benefit or final salary-type schemes.

Research from Unbiased has shown that UK savers with a pension pot of £100,000 save an average of £98 more every month and receive an additional £3,652 of income each year of retirement, if they take financial advice.

It has also been found that only 22% of people know the value of their pension pots and, without financial advice, only 14% would be confident planning their retirement goals.

Economic secretary to the treasury, Simon Kirby, said: “Pensions and savings decisions are some of the most important a person will make during their lifetime.

“This allowance will help people get the vital financial help they need to plan for their retirement.”