£1,500 you take out for advice will be tax-free

SAVERS are to be allowed to withdraw up to £1,500 tax-free from their pension pots to pay for financial advice, the Government has announced.

From this April, the new Pension Advice Allowance means people will be able to take £500 on up to three occasions, but only once in a tax year.

The allowance will be available to holders of defined contribution pensions and hybrid pensions with a defined contribution element, but not defined benefit or final salary-type schemes. The funds will be available at any age and can be redeemed against the cost of regulated financial advice.

Vital

The initiative aims to offer more savers access to retirement advice at different stages of their lives, for example when first choosing a pension or just prior to retirement.

Tom Selby, senior pensions analyst at AJ Bell, said: “This introduction of the advice allowance is an improvement on the existing system, but we need to be realistic about what this will achieve. According to the Treasury’s own analysis, face-to-face advice costs £150 per hour on average, and can take up to nine hours for pensions – meaning even with the allowance you still might have to make up a shortfall of £850.”

Simon Kirby, economic secretary to the Treasury, said: “This allowance will help people get the vital financial help they need to plan for their retirement.”