Introducing a Pensions Advice Allowance
Although the LITRG welcomes the opportunity for people to access pension funds for the purpose of paying for independent advice on retirement planning, we do not consider that the proposed £500 is anywhere near adequate to meet the probable fees of an independent financial adviser or other qualified adviser for full and proper advice.
- that the upper limit be raised to at least £1,000 or a maximum of 5% of an individual pot
- that provision is made for the limit to be regularly reviewed and uprated to ensure that it continues to be a realistic figure as compared to changes in the cost of advice (we suggest it is reviewed at least every three years)
- that interaction with means-tested benefits legislation is considered and addressed as appropriate – i.e. that it is clear that any pension withdrawal under the Pensions Advice Allowance (PAA) is not to be considered income for means-tested benefits purposes
- that savers should be given two bites at the cherry, one at least 10 years before permitted pension age in order to give savers sufficient time to take steps to improve their pension position, and again at point of crystallisation
- that adequate advice on the impact on benefits should be included, especially in view of the increasing number of auto-enrolled pension savers who may amass only small pots
- that only qualified and regulated advisers should be able to draw the PAA from providers to maximise the value of advice given and minimise fraud and scamming
- that the pensions industry be required to issue standardised notices about the availability of the PAA facility at the appropriate dates and the proposed new Public Financial Guidance service should promote knowledge and awareness at all stages of its pensions guidance
- that the Government might consider a penalty-free Lifetime ISA withdrawal analogous to the PAA, if savers have chosen to provide for their retirement in that scheme instead of, or in addition to, a traditional pension.
The LITRG submissions can be found here