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08 Feb 2017

Pensions advice allowance increases to £1,500

The Government´s HM Treasury has significantly increased the amount of money people are able to access from their pension before retirement in order to fund financial advice, City Wire recently reported.

Previously, the pension advice allowance was just £500; but following a consultation, this will now be tripled to £1,500 that savers can withdraw from their pensions tax-free to pay for advice.

Withdrawals must be in three amounts of no more than £500, over a period of different tax years. This means that savers could access £500 at the various stages throughout their working life to make sure their pension saving habits are on track and helping them to meet their savings targets.

The withdrawals will be made available for defined contribution (DC) schemes but not defined benefit (DB) schemes, and the money can be spent on face-to-face advice or a new type of robo-advice, which is said to be just as effective.

The rules will apply to savers of any age, not just those nearing their retirement.

It will be possible to use the £500 alongside a further £500 to make a total of £1,000 to spend on advice, as some respondents have suggested that £500 would not be a sufficient amount to cover holistic advice.

Others suggested there be a £500 recommended price point on financial advice, and were reluctant to pay more than this.

Commenting on the changes, the Treasury´s economic secretary Simon Kirby said they would allow people to save for a pension no matter what stage of their life they are at.

“Pensions and savings decisions are some of the most important a person will make during their lifetime,” he stated. “This allowance will help people get the vital financial help they need to plan for their retirement.”

Copyright M2 Bespoke 2017

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