Employer arranged pensions tax-free allowance
A new annual £500 tax-free allowance for any adult that receives advice for employer arranged pensions comes into effect from 6 April 2017. The advice provided can relate directly to the pension as well as to the general financial and tax issues relating to pensions. New draft guidance explaining these changes in more detail has recently been published by HMRC.
The new rules will replace existing provisions which limit the exemption solely to pensions advice and was capped at £150 per employee per tax year. The exemption will apply to the first £500 of pensions advice provided to an employee in a tax year, whether the employer pays for or reimburses the employee for the cost of the advice.
The exemption will apply if the advice is made available to employees generally or to employees at a particular location. However, it will also apply when the pensions advice is tailored to the employee’s specific personal circumstances when nearing retirement, either due to age or ill health.
A separate pensions advice allowance that allows those nearing retirement to take up to £500 out of their pension pots tax-free to put towards the cost of financial advice will also come into effect from 6 April 2017. The advice provided can relate directly to the pension as well as to other financial products that help build retirement income such as multiple pension pots and other assets like ISA savings.