You may have heard of the incoming Pension Advice Allowance, but what is this newly proposed scheme and what does it mean for pensioners in the UK?
The scheme offers pensioners the opportunity to withdraw up to £1500 from their funds tax-free (in three £500 instalments) in order to pay for financial advice on their pensions, encouraging them to seek professional advice.
The reasoning behind the scheme is fairly obvious – the newfound powers of pensioners to control the management of their own funds has created something of a knowledge vacuum. People are in control, but do they necessarily understand the nuances of the system and how to operate it to their best advantage?
Some have cautioned that this scheme may open up some to receiving subpar advice under the guise of ‘financial guidance’, which is an entirely different thing to FCA-authorised and regulated ‘financial advice’.
For example, The People’s Pension is urging the government to act to prevent companies from being able to actively approach people and encourage them to access their Pension Advice Allowance, fearing a wave of cold-calling and not-objective ‘advice’ that leads customers down routes that aren’t perhaps best for them.
Economic secretary to the treasury, Simon Kirby, commented: “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.”
As for us at DPT Financial we’re keen on people using the scheme to get past the perceived cost barrier when it comes to seeking proper, professional financial advice. The fact is that people who invest in professional advice save money in the long run.