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The Pensions Advice Allowance was recommended by the Financial Advice Market Review, which found that high quality financial advice can have a significant impact on retirement incomes if received early.
The Pensions Advice Allowance will allow consumers to access £500 of their defined contribution or hybrid pension pot tax free at any age, to redeem against the cost of pensions and retirement advice. This will make advice more affordable, and encourage consumers to consider taking advice to plan for their retirement.
Draft regulations have been published by HMRC.
The government is committed to ensuring that consumers are supported in making good financial decisions. The pension flexibilities introduced in April 2015 gave savers the ability to access their hard earned pension savings flexibly, as best suits their needs. This means that many consumers have a wider range of options to consider when they reach retirement.
However, the high quality financial advice available in the UK is not always accessible or affordable for individuals with lower levels of wealth. The government therefore announced at Budget 2016 that, as recommended by the Financial Advice Market Review, it would consult on introducing a Pensions Advice Allowance. This would allow people to take £500 tax free from their defined contribution pension to redeem against the cost of financial advice.
This consultation sets out the government’s preferred design for this allowance. It also invites comments on this design and a number of outstanding policy questions.