In plans unveiled by the Government, from April 2017, you could be able to withdraw up to £1,500 tax free from your pension pot to pay for pension advice.
Michael Gove May Believe Britain Has Had Enough Of Experts, But When It Comes To Retirement, Taking Pension Advice Could Well Increase Your Income
Tax Free Withdrawals For Pension Advice
The original policy on pension advice was announced in August 2016. It proposed to allow pension savers the right to draw £500 tax free from their pension, three times in their life.
Economic Secretary to the Treasury, Simon Kirby, said savers would only be able to make one withdrawal, of up to £500, in any given tax year. It’ll be available at any age, and could be used to pay for robo-advice as well as traditional face-to-face pension advice.
It’ll only be available for defined contribution (money purchase) pensions, or ‘hybrid’ defined benefit (final salary) pensions providing they have a money purchase element to them. It won’t be available for pure final salary pensions.
Commenting further, 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.
The Government referred to research that revealed only 22 per cent of those who had not yet retired knew the value of their pension pot, while only 14 per cent of people were confident planning their retirement without pension advice. It added:
According to Unbiased, 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 pension advice.
The Importance Of Pension Advice
MetLife Report Supports The Need For Pension Advice
A comprehensive report by MetLife entitled Guaranteeing Real Pension Freedom concluded a lack of choice and adequate understanding are combining to push pension savers to take unnecessary risks with their pensions pots. Most people act on their own account without taking proper pension advice.
A summary of the findings is shown in the infographic below.
According to the report, around three-quarters of pension savers view having a guaranteed level of income in retirement and flexibility as "important" while just over a quarter want all their retirement income guaranteed for life.
MetLife UK wealth management director Simon Massey said:
Despite almost half of savers taking more risk because of a lack of guaranteed income solutions for life, one in five admit they don't understand the choices they face to generate this retirement income. If they were confident, however, they might see there are ways of obtaining the guarantees they want. We believe retirement conversations need to change to include a wider range of options. Anything that encourages this, including guarantees and guaranteed drawdown to form part of the new guidance framework, should be supported across the board.
Pension Advice Can Often Pay Dividends
People are often reluctant to pay fees from their net income for pension advice, so having the ability to fund the cost of pension advice from your pension pot seems like a really sensible move.
If you need pension advice, you should speak to your trusted adviser, or you could find a local adviser from Unbiased.co.uk. Alternatively, we'd be pleased to introduce to a suitably qualified independent financial adviser with both SIPP and SSAS expertise for pension advice.
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