Government implements pension advice allowance

Following consultation, the government is to introduce an allowance for advice in relation to defined-contribution pension savings, with effect from April 2017. This will permit individuals to withdraw £500 tax-free from their pension pots on up to three occasions during their lifetime, but only once in a tax year, to pay for retirement advice. The new authorised payment, to be known as the pension advice allowance payment, will be available in addition to the exemption for employer-arranged pensions advice to be introduced in Finance Bill 2017. The key features are:

• the allowance will be limited to up to £500 per use;
• the allowance will be available at any age;
• individuals will be permitted three uses of the allowance in their lifetime, no more than once per tax year;
• the £500 will not be taxed on withdrawal from the pension pot, regardless of the individual’s income;
• the allowance can be withdrawn from defined contribution pensions and hybrid pensions with a money purchase or cash balance element;
• the payment of the allowance must be made direct from the pension scheme to the adviser;
• the allowance will only be available for regulated financial advice; and
• the allowance can be used alongside the proposed tax exemption for employer-arranged pensions advice.

HMRC has published in draft the Registered Pension Schemes (Authorised Payments) (Amendment) Regulations 2017 for consultation until 28 February. See http://bit.ly/2kIZsB2.