Higher-rate taxpayers have been handed a perk in the form of tax-free financial advice. The new Pension Advice Allowance which came into effect last month, means that pension savers can take up to £1,500 out of their pension pot tax-free over their lifetime in order to pay for financial advice.
One of the largest independent accountancy and business advisors in the area, Whitley Stimpson welcome the new rule which will help consumers get past the initial cost barrier to gain access to professional advice.
Owen Kyffin, tax expert and director at Whitley Stimpson said: “This move was aimed at getting more people to take financial advice and means that higher-rate tax payers, who would normally pay 40% on any withdrawals from their pensions, will effectively save £600.
Savings decisions and plans are some of the most important a person will make during their lifetime. This allowance now helps people get the vital financial help they need to plan for their retirement. The scope of the allowance is fairly broad and reflects the fact that it is not possible to make decisions about pensions in isolation from other aspects of an individual’s finances. In a lot of cases it comes down to good tax planning and the most efficient option for a family or individual’s circumstances.”
Pension savers are only allowed one withdrawal under the Pension Advice Allowance in each tax year. They can take up to £500 each time, on a maximum of three occasions. The withdrawal is open to anyone, so it is not just for those nearing retirement.
The Treasury has said that the advice being taken must be from a regulated source. The payment will be made directly from the pension provider to the advice service – either face-to-face advice or online, and cannot be paid out to individuals.